THE  FUNDING  BILL. 


SPEECH 


OF  MISSOURI, 

IN  THE  SENATE  OF  THE  UNITED  STATES,  MARCH  4,  1808. 


The  Senate,  asin  Committee  of  the  Whole,  resumed 
the  consideration  of  the  bill  (S.  No,  20T)  for  funding 
the  national  debt  and  for  the  conversion  of  the  notes 
of  the  United  States,  the  pending  question  being  on 
the  motion  of  Mr.  Henderson  to  amend  the  amend¬ 
ment  of  the  Committee  on  Finance  in  section  one. 
line  seven,  by  striking  out  the  word  "five”  and 
K  inserting  "  four”  before  the  words  "  per  cent.” 

'  Mr.  HENDERSON.  I  ask  that  the  first 
•  section  of  the  amendment  of  the  committee  be 
read . 

The  Secretary  read  as  follows : 

That  the  Secretary  of  the  Treasury  is  hereby  au¬ 
thorized  to  issue  registered  or  coupon  bonds  of  the 
United  States  in  such  form  and  of  such  denomina¬ 
tions  as  he  may  prescribe,  payable, principal  and  in¬ 
terest,  in  coin,  and  bearinginterest  at  the  rate  of  five 
er  cent,  per  annum,  payable  semi-annually,  and 
caring  date  so  as  to  require  the  payment  of  an  equal 
amount  of  the  interest  quarterly;  such  bonds  to  be 
payable  in  forty  years  from  date,  and  to  bo  redeem¬ 
able  in  coin  at  the  pleasure  of  the  United  States  after 
ten  years  from  date,  to  be  issued  to  an  amount  suffi¬ 
cient  to  cover  all  outstanding  or  existing  obligations 
of  the  United  States  other  than  the  existing  five  per 
cent,  bonds,  and  to  be  exchanged  for  such  obliga¬ 
tions  or  disposed  of  in  such  manner  and  on  such 
terms,  not  less  than  par,  as  the  Secretary  of  the  Treas¬ 
ury  may  deem  most  conducive  to  the  interests  of  the 
Government:  and  the  said  bonds  and  the  proceeds 
thereof  shall  be  exclusively  used  for  the  redemption 
of  or  in  exchange  for  the  existing  securities  of  the 
United  States. 

Mr.  HENDERSON.  Mr.  President,  it  will 
be  exceedingly  difficult  to  invest  a  subject  of 
this  character  at  present  with  any  interest.  I 
feel,  however,  that  it  is  the  most  important 
question  pending  before  us  at  this  time,  and 
yet  other  subjects  have  unquestionably  en¬ 
grossed  public  attention,  and  not  only  Senators, 
but  others,  approach  this  subject  with  a  great 
deal  of  reluctance.  I  propose  to  confine  my¬ 
self  as  closely  as  I  can  to  the  amendment  which 
I  have  offered  to  the  bill.  Senators  will  see 
that,  the  proposition  is  to  fund  the  public  debt 
of  the  United  States  in  a  five  per  cent,  security. 
My  motion  is  to  strike  out  five  per  cent,  and 
insert  four  percent. 


The  proposition  contained  in  the  bill  is  to 
fund  all  the  public  securities,  except  the  ten- 
fortiesalready  issued,  into  a  five  per  cent,  stock, 
redeemable  after  ten  years  and  payable  at  the 
end  of  forty  years.  The  ten-forties  already 
negotiated  bear  five  per  cent,  interest,  paid 
semi-annually,  and  are  by  express  terms  pay¬ 
able,  both  principal  and  interest,  in  gold. 
There  is  no  express  stipulation  as  to  how  the 
principal  of  any  other  bonds  is  to  be  paid.  The 
principal  of  some  of  the  Treasury  notes  is  pay¬ 
able  in  legal-tender  notes.  The  interest  of  a 
part  of  the  debt  is  payable  in  gold,  that  <>f 
another  part  is  payable  in  lawful  money,  while 
a  portion  of  the  debt  bears  no  interest  at  all. 
The  official  statement  of  the  public  debt,  made 
on  the  first  of  February,  presents  an  exhibit 
substantially  as  follows,  namely  : 

Debt  bearing  coin  interest . $1,912,363,0-11  80 

Debt  bearing  currency  interest .  308,708,630  00 

Matured  debt  not  presented  for  pay¬ 
ment,  chiefly  bearing  currency  in¬ 
terest .  12,888,169  19 

Debt  bearing  no  interest,  including 
United  States  notes,  fractional  cur¬ 
rency,  and  gold  certificates .  418,024.845  51 

Total . $2,651,384,686  50 


If  we  deduct  from  this  amountthe  ten-forties, 
amounting  to  $207,739,200,  we  have  the  amount 
authorized  to  be  funded  under  this  bill,  namely, 
$2,443,045,486  50.  But  the  holders  of  gold 
certificates  will  not  fund,  of  course,  and  the 
creditors  may  choose  to  carry  $400,000,000  of 
the  debt  in  the  shape  of  legal-tender  United 
States  notes.  If  so,  the  funded  debt  will  be 
as  follows : 


New  consols,  five  per  cent . $2,014, 026,206  50 

Old  ten-forties,  five  per  cent .  207.739,200  t  0 

Total . $2,221,765,406  50 


The  annual  interest  on  ibis  sum  would  be 
$112,574,234  30. 


2 


If  the  legal-tender  notes  should  remain  in 
volume  as  they  now  are  ($356,000,000)  the 
annual  interest  would  be  ($114,766,275  95,)  say 
in  round  numbers  $115,000,000. 

The  total  amount  of  indebtedness  issued 
under  acts  of  Congress  prior  to  February  25, 
1862,  is  comparatively  small,  and  it  is  possible 
that  under  prudent  management  such  indebt¬ 
edness  could  be  paid  otf  as  it  matures.  The 
main  body  of  the  debt  consists  of  five-twenties, 
amounting  at  the  February  statement  to  near 
$1,400,000,000,  to  which  must  soon  be  added 
the  seven-thirties,  the  compound-interest  notes, 
the  three  per  cent,  certificates,  and  other  float¬ 
ing  indebtedness,  amounting  to  about  three 
hundred  million  dollars. 

Mr.  MORTON.  For  the  purpose  of  having 
a  correct  understanding  of  the  statement  of  the 
Senator,  with  his  permission,  I  should  like  to 
ask  whether  he  includes  in  the  gross  amount 
to  be  funded  which  he  has  named  what  are 
called  the  sixes  of  1&81. 

Mr.  HENDERSON.  I  state  that  they  may 
be  funded  under  this  bill.  The  Senator  will 
see  that  as  the  bill  now  stands  reported  by  the 
chairman  of  the  committee  all  indebtedness 
may  be  funded  except  the  ten-forties.  I  do 
not  say  that  they  will  be  funded,  but  they  may 
be  funded,  and  if  funded  the  whole  funded 
debt  would  be  $2,443,000,000. 

Mr.  MORTON.  I  believe  those  bonds  con¬ 
tain  no  right  of  redemption  before  they  are  due. 

Mr.  HENDERSON.  I  suppose  they  will 
not  be  funded. 

It  is  this  indebtedness  of  about  seventeen 
hundred  million  dollars  about  which  the 
controversy  in  regard  to  the  mode  of  payment 
has  arisen.  Some  say  it  is  legitimate  and 
proper  for  the  Government  to  pay  it  off  in 
lawful  money — that  is,  in  greenbacks.  Others 
contend  that  it  must  be  discharged  in  coin 
only.  Some  insist  that  it  may  not  only  be  paid 
in  paper  promises,  but  that  the  Government 
may  rightfully  issue  new  and  additional  prom¬ 
ises  for  that  purpose,  while  others — like  the 
chairman  of  the  Finance  Committee,  Mr.  Sher¬ 
man — admitting  the  right  to  pay  in  greenbacks, 
insist  that  during  the  process  of  payment 
the  Government  cannot  legally  or  honorably 
issue  exceeding  $400,000,000  of  legal-tender 
notes.  They  think  the  Government  agreed 
for  all  time  to  come,  at  least  till  the  debt  should 
be  paid  off,  that  the  issue  of  legal  tender  notes 
should  be  limited  to  this  amount,  and  that  the 
honor  of  the  Government  is  involved  in  keep¬ 
ing  the  promise. 

Before  proceeding  to  examine  these  ques¬ 
tions  in  a  legal  point  of  view  it  may  be  well  to 
glance  at  some  general  facts  connected  with 
the  public  debt.  I  have  already  shown  that 
the  probable  funded  debt  of  the  Government, 
excluding  the  ten-forties,  will  in  a  short  time 
be  about  two  thousand  million  dollars.  If 
funded  under  existing  laws  it  will  bear  six  per 
cent,  interest.  If  funded  under  this  bill  it  will 
bear  five  per  cent.  Now,  if  this  debt  can  be 


legally  discharged  in  currency,  gold  being 
worth  140,  it  would  require  $1,428,571,428  in 
gold  to  pay  it.  The  saving,  therefore,  to  the 
public  in  the  payment  of  the  debt  would  be 
$571,428,572  in  gold,  equal  -to  $800,000,000 
in  legal-tender  paper.  In  other  words,  if  the 
debt  could  now  be  discharged  with  paper 
money  instead  of  gold,  the  debtor  class  wouid 
save  $800,000,000  in  paper  value  by  the  opera¬ 
tion.  Therefore  it  should  not  be  surprising 
that  the  terms  and  conditions  of  the  contract 
creating  it  are  so  closely  scrutinized  by  all  par¬ 
ties.  Between  the  debtor  and  creditor  classes 
(1  use  these  terms  as  appropriate  terms  when 
applied  to  the  public  debt,  because  the  securi¬ 
ties  are  not  to  be  taxed  even  for  their  own 
liquidation)  the  construction  of  the  contract  at 
once  becomes  a  question  of  the  greatest  prac¬ 
tical  importance.  It  involves  no  less,  perhaps, 
than  one  twentieth  part  of  the  entire  property, 
real  and  personal,  of  this  country  to-day. 

Leaving  out  of  view  for  the  present  all  ques¬ 
tions  connected  with  specie  payments,  suspen¬ 
sion,  expansion  and  contraction,  which  1  will 
notice  in  their  proper  places,  the  fact  is  plain 
enough  to  every  one  that  if  the  debts  proposed 
to  be  funded  are  payable  only  in  gold  it  will 
require  $2,000,000,000  in  gold  to  discharge 
them  whenever  paid.  If  payable  in  paper — 
legal-tender  currency — the  amount  of  that  cur¬ 
rency  necessary  to  pay  them  could  now  be  pur¬ 
chased  for  $1,428,571,428  in  gold.  This  is 
a  plain,  common-sense  fact,  which  no  figures 
of  rhetoric  can  conceal  and  no  metaphysical 
sophistry  can  confuse.  Jf  we  are  compelled 
to  pay  in  coin,  if  such  was  our  contract,  if  it 
be  “so  nominated  in  the  bond,”  then  the  pub¬ 
lic  must  accept  the  terms  and  raise  this  large 
additional  sum  beyond  what  would  be  required 
were  the  debt  payable  in  the  medium  of  ex¬ 
change  established  by  the  Government  itself. 

Jf  we  would  realize  a  proper  sense  of  the 
importance  of  the  question,  let  it  be  reflected 
upon  for  a  moment,  that  if  the  Government, 
admitting  its  liability  to  pay  in  gold,  should 
now  be  able  to  pay  off  an  amount  of  this  debt 
equal  to  the  sum  in  gold  which  would  to-day 
fully  discharge  it  in  paper,  and  should  there¬ 
after  execute  new  bonds  for  the  balance,  to 
wit:  the  $571,500,000,  to  be  paid  at  the  end 
of  forty  years  with  five  per  cent,  semi-annual 
interest  compounded,  the  amount  of  Govern¬ 
ment  indebtednessat  the  maturity  of  the  bonds 
would  be  $4,119,711,289  83  in  gold,  or  $5,767, - 
600,000  in  a  currency  bearing  the  value  of  the 
present  United  States  notes,  a  sum  nearly 
equal  to  one  fourth  the  aggregate  wealth  of 
the  nation  to-day. 

It  should  be  remembered,  that  whether  the 
interest  be  paid  as  the  coupons  mature,  or  the 
whole  sum,  principal  and  interest,  be  paid  at 
the  maturity  of  the  bonds,  makes  but  little 
difference  to  the  bondholders  themselves.  If 
the  interest  be  paid  to  them  as  it  matures 
they  can  reloan  it,  and  accumulate  as  much  as 
the  Government  would  have  to  pay  them. 


3 


The  great  fact  stands  out,  that  they  and  their 
descendants  at  the  end  of  forty  years  will  have 
drawn  this  vast  sum  from  the  earnings  of 
others.  In  other  words,  the  creditor  class 
will  be  so  much  richer  and  the  debtor  class 
so  much  poorer. 

The  measure  before  the  Senate,  so  zealously 
and  so  ably  vindicated  by  the  chairman  of  the 
Committee  on  Finance,  [Mr.  Sherman,]  pro¬ 
poses  to  settle  this  question  of  construction 
by  agreeing  to  pay  the  whole  sum  in  gold. 
The  Senator  claims  the  right  to  pay  in  green¬ 
backs  ;  indeed,  he  goes  further  and  claims  the 
right  to  increase  the  greenback  circulation  to 
$400,000,000,  which,  according  to  his  argu¬ 
ment,  would  depreciate  it  in  value,  and  then 
pay  otf  the  debt  in  paper.  As  I  cannot  agree 
with  him  in  the  statement  that  such  increase 
of  legal-tender  notes  as  he  proposes  would 
necessarily  depreciate  them  in  the  least,  1 
shall  claim  nothing  in  the  argument  on  that 
score.  But,  as  he  determines  to  settle  this 
question  of  construction  in  favor  of  the  bond¬ 
holder,  he  naturally  seeks  for  some  equivalent 
to  the  debtor.  What  does  he  propose?  Simply 
to  take  off  one  per  cent,  of  the  interest.  JLie 
deems  this  a  fair  consideration  to  the  debtor. 
If  the  creditors  will  reduce  their  interest  from 
six  to  five  per  cent,  the  debtor  and  creditor 
classes,  he  thinks,  will  be  equally  and  fairly 
dealt  with  by  their  representatives. 

We  have  often  heard  that  figures  will  not 
lie.  This  supposes,  of  course,  that  they  are 
rightly  used.  If  1  understand  their  use, 
there  is  no  difficulty  in  ascertaining  precisely 
what  is  gained  and  what  is  lost  on  either 
side  by  this  new  proposition.  I  have  already 
shown  what  the  creditors  would  gain  instantly 
by  a  change  of  the  contract,  provided  the  in¬ 
terest  of  six  per  cent,  be  left  as  it  is  now. 
But  as  the  creditors  are  to  yield  up  one  per 
cent,  per  annum,  on  say  $2,000,000,000  of 
indebtedness,  the  consideration  paid  by  them 
is,  of  course,  $20,000,000  per  annum  for  ten 
years  at  five  per  cent,  interest.  But,  as  it  is 
to  be  paid  half  yearly,  we  have  only  to  obtain 
the  present  worth  of  an  annuity  of  $20,000,000 
for  ten  years  at  five  per  cent,  to  be  paid  semi¬ 
annually.  The  present  worth  of  such  an  an¬ 
nuity  is  $155,589,102.  The  Government  then 
gives  to  the  creditors  by  changing  the  contract 
$571,428,572,  and  the  creditors  give  the  Gov¬ 
ernment  $155,589,162 ;  leaving  balance  against 
the  Government,  of  $415,839,410  in  gold. 

If  the  Senator  is  seeking  an  equivalent  of 
consideration  between  the  parties — and  upon 
his  hypothesis  he  must  find  such  equivalent 
before  he  finds  that  element  of  justice  which 
will  prove  satisfactory  to  the  country — he  must 
reduce  his  interest  3.67  per  cent.,  leaving  the 
bonds  to  bear  only  2.33  per  cent.,  payable 
semi-annually. 

Connected  with  this  question  is  another  fact 
which  I  will  barely  allude  to  in  passing  along 
to  the  chief  points  involved  in  the  bill.  It  is 
this.  Our  public  debt  is  so  large  as  to  absorb 


the  whole  surplus  capital  of  the  country.  The 
larger  part  of  that  surplus  is  to  be  found  among 
the  people  of  the  older  States.  Hence  the  pub¬ 
lic  securities  are  largely  held  in  these  States  for 
the  mere  purposes  of  income  arising  from  tl^e 
interest.  The  western  States  might  purchase 
them  in  considerable  quantities  for  purposes 
of  banking  if  the  banking  laws  permitted  it; 
but  the  legislation  of  Congress  has  strangely 
combined  with  natural  causes  to  concentrate 
these  securities  in  the  eastern  and  middle 
States.  The  State  banks  of  the  West,  like 
those  of  other  sections,  were  blotted  out  by  act 
of  Congress,  and  owing  to  the  limitation  upon 
national  banking  no  substitute  therefor  is 
furnished. 

The  bonds  draw  an  interest  of  six  per  cent, 
in  gold,  payable  semi-annually,  which,  of 
course,  increases  the  interest  to  a  little  over 
six  per  cent.  This  gold  interest  is  equal  to 
about  eight  and  a  half  per  cent,  in  currency. 
The  bonds  are  free  from  all  taxation,  which, 
as  Senators  will  find  by  examining  the  aver¬ 
age  amount  of  tax  levy,  especially  in  the 
cities  of  thn  several  States,  for  State,  county, 
city,  school  and  sinking  fund  purposes,  is 
not  less  than  two  and  a  half  percent.  This, 
being  added,  places  the  interest  at  about 
eleven  per  cent.  A  security  so  desirable  as 
this,  to  be  had  in  sufficient  quantities  to  ab¬ 
sorb  the  whole  surplus  capital  of  the  country, 
absolutely  precludes  the  possibility  of  borrow¬ 
ing  money  except  at  the  most  ruinous  rates. 
The  West  is  full  of  activity  and  energy  and 
has  large  undeveloped  resources,  but  it  can 
not  afford  to  pay  from  ten  to  fifteen  per  cent, 
for  the  use  of  capital,  and  Senators  will  see 
that  the  Government  bond  is  a  better  security 
than  the  best  gilt-edged  private  paper  at  the 
same  rate  of  interest.  A  loan  of  money  on 
the  bond  involves  no  examination  of  title  or 
solvency  of  sureties,  no  attorney’s  fees  for 
deeds  of  trust  and  mortgages,  no  stamp-tax, 
no  recorder’s  bills,  no  loss  of  interest  in  seek¬ 
ing  a  new  investment,  no  bankruptcies  or 
compositions  with  debtors  and  no  cost  of  final 
collection. 

Thus  it  is  that  the  recent  contraction  meas¬ 
ures  of  the  Government,  leaving  no  capital  not 
invested  in  its  securities,  produced  great  dearth 
of  money  in  the  West  and  rightfully  called  forth 
the  most  bitter  complaints.  If  it  be  said  again, 
as  it  has  often  been  said  heretofore,  that  this 
clamor  against  bondholders  is  a  selfish  and 
sectional  one,  confined  to  the  people  of  the 
West,  I  answer  that  the  Government  has  forced 
that  section  to  vindicate  itself  from  the  utter 
destruction  of  its  material  interests,  threatened 
by  vicious  and  erroneous  measures  of  finan¬ 
cial  policy. 

These  measures,  so  fraught  with  ruin,  have 
forced  us  to  examine  critically  into  the  mode 
and  manner  of  creating  the  public  debt;  the 
equities  connected  with  it;  the  propriety  of  its 
speedy  or  deferred  payment;  the  possibility  of 
diminishing  its  burdens;  our  means  of  pay- 


4 


ment.,  and  the  measures  best  calculated  to  pre¬ 
serve  the  public  credit  consistent  with  the 
reasonable  prosperity  of  the  people  and  the 
advancement  of  industrial  pursuits.  If  I  were 
to  say  that  the  public  debt  is  so  large  as,  even 
with  the  best  intentions,  to  render  its  payment 
improbable  within  the  next  century,  or  possibly 
within  the  next  two  centuries,  I  should  wound 
the  pride  of  somebody.  Therefore  I  will  not 
say  it.  If  I  were  to  say  that  large  and  oppres¬ 
sive  public  debts  are  least  certain  of  payment 
in  a  pure  democracy,  and  next  under  institu¬ 
tions  of  a  republican  character,  where  the 
debtors  must  always  be  more  numerous  than 
the  creditors,  and  where  heavy  rates  of  interest 
daily  add  to  the  luxuries  of  the  rich  and  to  the 
miseries  of  the  poor,  some  one  of  fewer  years 
or  of  more  enthusiastic  temperament  than 
myself  might  charge  me  with  reflecting  on  our 
system  of  Government. 

As  I  think  it  the  best  system  known  among 
men  and  hope  to  see  it  improved,  eveu  in  the 
liberality  of  its  democracy  whatever  may  be¬ 
come  of  the  debt,  1  would  not  venture  on  such 
an  assertion,  if  I  believed  it,  for  it  might 
open  the  door  to  misrepresentation  and  some 
unjust  criticism  upon  myself.  I  cannot  well 
be  assailed,  however,  for  alluding  to  facts 
already  developed,  a  concealment  of  which 
would  only  complicate  the  national  troubles. 
Among  these  facts  it  may,  I  think,  be  confi¬ 
dently  stated  that  our  debt,  as  it  now  exists, 
is  the  most  onerous  and  oppressive  one  that 
weighs  down  the  energies  of  any  nation  on 
earth. 

Take  the  entire  expenditures  of  our  Govern¬ 
ment  from  March  4,  1789,  down  to  June  30, 
1861,  a  period  of  seventy-two  years,  and  they 
amount  to  $2,235,077,161  61 — a  sum  less  than 
our  present  public  debt  by  $400,000,000. 
This  includes  the  debt  of  the  Revolution,  the 
war  ol  1812,  the  numerous  swindling  and  ex¬ 
pensive  wars  with  Indians,  the  war  with  Mex¬ 
ico.  the  purchase  of  Florida,  Louisiana,  and 
Arizona.  During  that  period  the  entire  re¬ 
ceipts  of  customs,  passingdown  from  the  tariffs 
of  Alexander  Hamilton,  through  the  high  tariff 
of  1828,  which  threatened  to  dissolve  the  Union, 
the  compromise  sliding  scale  of  1833,  the  pro¬ 
tective  duties  of  1842,  the  revenue  rates  of 
1846  to  the  Morrill  tariffs  of  1857  and  1861, 
amounted  only  to  $1,575,152,579  92 — a  thou¬ 
sand  millions  less  than  our  present  debt. 

The  entire  receipts  from  public  lands,  once 
regarded  as  a  security  upon  which  untold  mil¬ 
lions  might  rest,  from  the  origin  of  the  Gov¬ 
ernment  to  1861,  amounted  to  but  $175,817,- 
961  20 ;  the  receipts  from  all  sources  including 
internal  tax  and  loans  during  the  seventy-two 
years,  were  less  than  $2,271,000,000.  The 
estimated  wealth  of  the  United  States  in  1860, 
excluding  slaves,  was  $14,146,523,676  ;  that  of 
Great  Britain  at  the  same  time,  $31,512,000,- 
000;  that  of  France  in  1866,  say  $32,000,000,- 
C00.  For  1868,  estimated  wealth  of  the  United 
States,  after  deducting  for  losses  of  the  war  and  ! 


depreciation  of  property  in  the  seceding  States, 
$20,000,000,000;  estimated  wealth  of  Great 
Britain,  $34,842,747,000;  France,  $34,000,- 
000,000.  In  1868,  the  debt  of  Great  Britain  is, 
say,  $3,887,489,220;  France,  $2,600,000,000, 
and  the  United  States,  $2,651,000,000.  The 
population  of  Great  Britain  is,  say,  31,000,000; 
that  of  France,  38,000,000,  and  of  the  United 
States  say,  38,000,000.  The  wealth  per  capita 
of  the  people  of  Great  Britain  is,  $1,124  ;  of 
France,  $843  25,  of  the  United  States, $502  37. 

The  amount  of  interest  paid  by  Great  Brit¬ 
ain  on  her  debt  is  $126,628,890 ;  by  France, 
$70,000,000,  and  by  the  United  States  in  1867 
$143,000,000. 

Even  if  the  debt  be  funded  as  proposed  our 
annual  interest  cannot  be  less  than  $114,000,- 
000.  In  Great  Britain  the  people  pay  annually 
per  capita  for  interest  $3  26  ;  in  France,  about 
$2  ;  in  the  United  States,  if  the  debt  be  not 
funded,  $4  03;  if  funded,  $3  20.  InGreatBrit- 
ain  each  dollar  of  wealth  owes  to  the  public  debt 
11&  cents  ;  in  France,  8Jcents,  and  in  the  Uni¬ 
ted  States  13£  cents. 

The  rate  of  interest  on  the  public  debt  in 
England  is  three  percent. ;  on  over  three  fourths 
of  the  debt  in  France,  three  per  cent,  and  lour 
and  four  and  one  half  per  cent,  on  the  remain¬ 
der,  and  in  the  United  States  six  per  cent.,  and 
now  that  it  is  proposed  to  reduce  it  to  five  per 
cent,  some  people  are  shocked  at  the  immoral¬ 
ity  of  the  proposition. 

In  Great  Britain  each  $100  of  property  pays 
annually  for  interest  36  cents  ;  in  France,  20 
cents;  in  the  United  States,  57  cents. 

If  we  take  the  current  yearly  expenditures 
of  these  Governments  for  all  purposes,  we  find 
that  each  $100  in  England  pays  95  cents;  in 
France,  $1  11 ;  in  the  United  States,  $1  73. 

In  consequence  of  this  large  debt,  I  have 
already  said,  money  is  diverted  from  the  chan¬ 
nels  of  productive  industry.  To  meet  the 
accruing  interest  makes  it  necessary  to  resort 
to  high  tariffs.  To  meet  the  current  expenses 
of  the  Government  we  are  forced  to  levy 
burdensome  rates  of  internal  taxation.  This 
tends  to  reduce  the  profits  upon  business, 
while  it  largely  increases  the  price  of  the  pro¬ 
ducts  without  corresponding  benefits  to  the 
producer.  This  condition  of  things  has  thrown 
the  balance  of  trade  against  us.  To  meet  that 
balance  we  have  been  forced  to  ship  bonds  to 
Europe,  until  now  the  interest  on  these  bonds 
constitutes  an  annual  balance  against  us  of  no 
less  than  $30,000,000.  The  imports  and  ex¬ 
ports  of  the  last  four  months  exhibit  a  state 
of  affairs  less  satisfactory  than  ever.  If  we 
continue  to  ship  bonds  to  meet  these  balances, 
it  only  aggravates  the  evil.  If,  on  the  other 
hand,  we  ship  gold  it  will  drain  us  of  the 
precious  metals  in  less  than  five  years’  time, 
and  specie  payment  will  become  a  myth  indeed. 
When  the  coin  is  gone,  importations  must 
cease.  When  importations  cease,  the  custom¬ 
house  no  longer  furnishes  goLi  with  which  to 
pay  accruing  interest. 


5 


To  sustain  our  credit  the  interest  must  be 
paid.  To  pay  the  interest,  gold  must  then  be 
purchased  with  depreciated  paper,  collected 
in  the  shape  of’  internal  taxation  from  the 
suffering  and  prostrate  business*  of  the  coun¬ 
try.  When  we  shall  have  arrived  at  this 
point — and  without  the  most  thorough  and  rad¬ 
ical  measures  we  shall  soon  reach  it— the  pub¬ 
lic  credit  will  be  hopelessly  lost.  Not  only 
will  public  credit  be  lost,  but  the  means  of  re¬ 
suscitating  it  will  be  lost  also.  The  currency 
of  the  country,  whether  we  expand  or  contract 
it,  will  then  be  deranged;  prices  will  be  exor¬ 
bitantly  high ;  the  rewards  of  labor  will  scarcely 
furnish  the  means  of  livelihood ;  individual 
credit  will  be  worthless,  and  a  period  of  gen¬ 
eral  bankruptcy  will  set  in.  This  is  a  dark 
picture.  I  hope  it  is  overdrawn.  Unless 
Congress  performs  its  duty  during  this  session 
the  reality  I  fear  will  be  worse  than  any  pic¬ 
ture  I  can  draw. 

Some  persons  will  complain  of  this  view  of 
the  subject.  They  will  profess  to  see  in  it  an 
attack  on  the  public  credit.  Nothing  that  1 
may  say  will  damage  the  Government  credit. 
Capitalists  may  not  speak  so  plainly  as  1  do, 
but,  if  men  are  to  be  judged  by  their  actions, 
they  think  more  than  i  dare  say.  They  tell  us 
that  the  bonds  are  payable,  principal  and  in¬ 
terest,  in  gold.  Such  they  say  is  the  contract. 
They  also  tell  us  that  the  Government  is  able 
to  resume  specie  payments  to  day,  and  loudly 
insist  that  there  is  no  necessity  for  reducing 
the  interest  to  enable  the  Government  to  pay 
in  coin.  They  tell  us  that  our  resources  are 
perfectly  abundaut,  and  yet  in  the  face  of  all 
this  our  bonds  are  hawked  about  in  foreign 
markets  at  71  and  72  cents  in  English  gold  and 
at  from  70  to  78  in  New  York,  payable  in 
American  gold.  An  English  three  per  cent, 
consol,  payable  at  the  option  of  the  Govern¬ 
ment,  sells  at  94  cents  by  the  side  of  a  five¬ 
's  twenty  six  per  cent,  bond  struggling  for  credit 
at  71-.  Hudson  River  railroad  shares,  declar¬ 
ing  an  annual  dividend  of  eight  per  cent,  in 
currency,  sell  for  145  in  New  York,  while  the 
Government  bond  sells  for  104  to  110  in  cur¬ 
rency.  Cleveland  and  Toledo  shares,  with  an 
annual  currency  dividend  of  seven  per  cent., 
bring  109.  Illinois  Central  with  ten  per  cent, 
dividends  sell  for  135,  and  New  York  Central 
with  six  per  cent,  dividends  sell  for  126.  These 
facts  indicate  a  want  of  confidence.  Either 
the  debt  itself  or  the  interest  on  it  is  too  large. 
There  is  a  doubt  about  something.  Capitalists 
either  doubt  the  Government’s  ability,  or  its 
disposition  to  pay.  The  Government  so  far 
has  paid  its  interest,  and  nearly  broken  down 
the  energies  of  the  people  in  an  effort  to  pay 
a  part  of  the  principal.  The  doubt,  then,  must 
be  in  regard  to  its  ability  and  not  its  disposi¬ 
tion.  It  will  be  observed  that  in  the  Secre¬ 
tary’s  last  report  the  estimates  for  the  future 
are  not  calculated  to  strengthen  confidence. 
For  the  last  three  quarters  of  the  fiscal  year 


18G8  he  figures  up  a  surplus  of  only  $1,099,090, 
and  for  the  fiscal  year  1869  with  difficulty  he 
finds  a  surplus  of  $9,000,009,  which  1  fear  will 
never  be  realized. 

Listen  to  the  complaints  of  the  people  of 
every  section,  coining  up  trumpet-tongued  to 
Congress,  asking  for  relief  from  taxation.  See 
the  conventions  being  held,  telling  of  ruined 
commerce,  of  crippled  industry,  of  dwarfed 
production,  the  dearth  of  money,  and  the  gen¬ 
eral  stagnation  of  business.  In  this  state  of 
things  convention  after  convewtion  of  both  the 
great  political  parties,  in  the  Western  States, 
meets  and  demands  a  change  in  financial  pol¬ 
icy.  Some  of  the  bondholders — not  all — 1  am 
glad  to  know,  and  many  of  their  indiscreet 
friends,  however,  are  inexorable.  They  have 
the  wealth  ;  they  own  the  newspapers  ;  they  can 
pay  the  price  demanded  for  the  influence  of 
talent;  they  tell  us  the  debt  is  sacred;  Con¬ 
gress  can  no  longer  legislate  on  those  subjects 
which  of  right  belong  to  the  Representatives  of 
a  free  people  ;  if  former  legislation  were  preju¬ 
dicial  to  them,  it  must  be  repealed  ;  if  the 
currency  were  expanded  when  they  purchased 
securities,  it  must  now  be  withdrawn,  for  thus 
they  imagine  the  securities  mount  to  a  gold 
value;  if  the  issue  of  United  States  notes  were 
limited  when  they  purchased,  this  limit  must 
not  be  exceeded,  though  increased  population, 
business,  wealth,  and  enlarged  area  of  country 
should  all  combine  to  demand  it. 

Congress,  they  admit,  could  properly  make 
gold  contracts  between  individuals  payable  in 
depreciated  paper,  but  it  cannot  touch  the 
public  debt.  Congress  could  lay  its  heavy  hand 
upon  $600,000,000  of  State  bank  capital  and 
force  sixteen  hundred  banks  into  liquidation  as 
one  of  the  means  to  float  these  very  bonds 
upon  the  market,  but  now  the  bonds  are  be¬ 
yond  the  vulgar  touch  of  the  people  or  their 
Representatives.  State  bank  circulation,  de¬ 
clared  legal  under  the  high  sanctions  of  the 
Supreme  Court,  could  be  taxed  ten  per  cent, 
per  annum  for  the  avowed  purpose  of  its  de¬ 
struction,  but  who  dares  propose  a  tax  on  Gov¬ 
ernment  bonds?  It  was  right  to  pay  the  sol¬ 
dier  in  currency,  though  he  enlisted  before  the 
legal-tender  act  passed.  It  is  now  right  to  pay 
his  bounty  and  pension  in  currency,  though  he 
founds  his  right  to  receive  them  on  the  act  of 
July,  1861.  It  was  right  to  pay  the  builders 
of  boats  and  other  contractors  in  constantly 
depreciating  currency,  but  to  apply  the  same 
rule  to-day  to  the  fundholder  is  sacrilege.  It 
was  right,  in  order  that  the  Government  might 
live,  that  that  hoary  iniquity,  human  slavery, 
and  the  $2,000,000,000  claimed  to  be  invested 
in  it,  should  be  blotted  out,  and  blotted  out 
forever. 

A  few  days  since  an  able  and  somewhat  in¬ 
teresting  pamphlet  fell  into  my  hands,  in  which 
were  the  following  words  : 

“Let  all  ropndiators  and  all  advocates  for  pay¬ 
ment  of  tho  pubiio  debt  in  promises  to  pay  on  do- 


mand,  which  are  not  meant  to  be  kept,  be  treated  as 
public  enemies.  It'  any  member  of  Congress  should 
be  known  to  favor  those  measures  he  should  be 
promptly  ejected  from  his  seat  and  returned  to  his 
constituents  to  study  the  principles  of  common  hon-  1 
esty.” 

This  intemperate  language  appears  in  an  j 
article  attacking  the  privilege  to  convert  bonds, 
even  at  the  option  of  the  holder,  and  denounc¬ 
ing  the  repeal  of  the  limitation  on  national 
banking.  The  purpose,  then,  is  to  force  up  the 
value  of  bonds  by  an  exhausting  system  of  con¬ 
traction,  in  utter  disregard  of  every  material 
interest  of  nineteen  twentieths  of  the  people. 

Mr.  President,  suppose  that  by  reducing  the 
rate  of  interest  the  bond  would  be  increased 
and  not  diminished  in  value.  It  is  now  worth 
less  than  72.  Suppose  it  would  then  command 
84 — about  the  price,  I  believe,  of  a  four  per 
cent.  Brazilian  bond  to-day — would  the  creditor 
be. injured?  Would  lie  not  be  benefited?  if 
he  choose  not  to  retain  a  four  percent,  security 
he  can  easily  sell  it  at  an  advance  of  fourteen 
cents  to  the  dollar,  and  invest  the  proceeds  in 
some  other  depreciated  six  per  cent.  bond. 
There  are  but  few  Governments  that  issue  bonds 
with  such  high  rate  of  interest,  but  whenever 
issued  they  are  invariably  depreciated.  The 
increase  of  wealth  in  no  nation  is  equal  to  six 
per  cent,  per  annum  for  a  long  series  of  years; 
hence  no  nation  can  pay  it  without  bankrupt¬ 
ing  its  Government  or  impoverishing  its  peo¬ 
ple.  Capitalists  know  this  thing,  and  they 
always  distrust  such  securities. 

Let  us  suppose,  again,  that  a  reasonable 
increase  of  currency,  either  in  the  shape  of 
legal- tender  notes  or  national  bank  paper,  or 
both,  would  tend  to  revive  drooping  industr}’’, 
increase  the  products  of  labor,  assist  in  the 
development  of  what  is  now  unproductive 
wealth,  enable  the  nation  to  swell  its  exports 
above  its  imports,  what  harm  would  be  done 
to  the  bondholder?  if  these  results  should 
follow,  the  effect  would  be,  I  think,  to  appre¬ 
ciate  bis  security.  I  feel  satisfied  that  such 
would  be  the  result,  and  therefore  I  insist  that 
those  who  favor  this  policy  shall  not  be  ex¬ 
pelled  from  Congress  by  their  fellow-members 
at  the  bidding  of  a  foolish  bondholder  who 
knows  not  his  own  interest. 

IN  WHAT  CURRENCY  THE  DEBT  SHOULD  BE  PAID. 

A  word  now  in  regard  to  the  law  of  this 
question.  On  the  1st  day  of  July,  1861,  the 
public  debt  was  $90,867,828  68.  There  was 
no  stipulation  in  what  medium  it  should  be 
paid.  Gentlemen  argue  that,  having  been 
issued  when  gold  was  the  currency,  it  must, 
therefore,  be  paid  in  gold.  They  insist  that, 
this  understanding  controls  the  contract  as 
much  as  if  it  appeared  in  express  terms.  This 
argument,  it  will  be  perceived,  goes  upon  the 
hypothesis  that  it  is  incompetent  for  the  Gov¬ 
ernment  to  make  anything  else  than  the  pre¬ 
cious  metals  a  legal  tender  in  the  payment  of 
debts.  Is  it  not  too  late  in  the  day  for  our 
people  to  stand  on  any  such  argument?  The 


right  has  been  exercised  for  six  years,  and 
during  that  time  this  vast  debt  has  been  created, 
if  the  act  was  legal  at  any  time  it  is  legal  now. 

But,  aside  from,  the  question  of  power,  an 
argument  on  ‘the  side  of  good  morals  and 
common  honesty  is  presented.  It  is  said  the 
paper  is  not  so  valuable  as  the  metal.  If  it 
were  as  valuable  the  creditor  could  not  com¬ 
plain.  lie  could  not  possibly,  in  that  case,  be 
damaged,  for,  holding  the  one  currency,  he 
could  convert  it  into  t lie  other.  If  this  argu¬ 
ment  be  worth  anything  it  is  worth  a  great 
deal.  It  goes  to  this  extent,  that  after  a  debt 
is  contracted  the  Government  cannot  legally 
coin  additional  gold  or  enlarge  the  circulation 
of  the  precious  metals.  Being  now  in  debt, 
the  gold-fields  of  California,  Montana,  Colo¬ 
rado  and  Nevada  would  be  useless  to  us,  be¬ 
cause  we  cannot  increase  the  volume  of  the 
specie  circulation  without  depreciating  to  the 
same  extent  the  public  securities,  and  thereby 
injuring  our  creditors.  I  hold  that  if  the  Gov¬ 
ernment  can  stamp  paper  with  legal  value  at 
all  it  is  as  much  money  as  gold  itself. 

If  the  power  existed  to  do  so  when  the  legal- 
tender  act  passed  in  February,  1862,  it  existed 
at  all  previous  periods  of  the  Government,  and 
it  exists  now.  If  it  existed  at  all  it  existed  by 
virtue  of  the  Constitution,  and  the  Constitu¬ 
tion  was  the  same  prior  to  1862  as  it  then  was. 

It  is  admitted  there  is  no  express  contract  to 
pay  the  debt  in  gold.  It  can  only  he  claimed 
as  an  implied  agreement.  It  occurs  to  me  that 
other  implications  are  just  as  reasonable,  is 
it  not  more  reasonable  to  infer  that  the  public 
creditor,  purchasing  a  Government  bond,  takes 
it  subject  to  the  exercise  by  Congress  of  all  its 
constitutional  powers?  It  is  surely  legitimate 
for  Congress,  after  it  contracts  a  debt,  to  coin 
money  and  put  it  in  circulation.  It  is  equally 
clear  that  Congress  may  regulate,  and  there¬ 
fore  change,  its  value.  The  coinage  of  gold 
may  be  double  or  quadruple  in  amount,  or  the  *•' 
use  of  gold  as  a  medium  of  exchange  may 
be  abandoned  altogether  and  something  else 
adopted.  1  may  admit  it  is  competent  for  the 
Government  to  agree  expressly  to  pay  in  gold 
or  any  other  article  without  weakening  my 
position. 

If  it  agrees  to  pay  gold  I  do  not  object  to  its 
doing  so  ;  but  when  no  specific  agreement  is 
made  I  insist  that  both  debtor  and  creditor 
are  supposed  to  contract  subject  to  all  the  con¬ 
tingencies  of  future  legislation.  That  legis¬ 
lation  may  be  such  as  to  make  the  debt  more 
or  less  valuable  at  the  time  of  its  payment. 
This  fact  is  understood  by  both  parties  when 
the  contract  is  made,  and  enters  into  and 
forms  a  part  of  it.  What  I  have  now  said  in 
reference  to  the  debt  already  existing  on  the 
1st  day  of  July,  1861,  applies  with  equal  force 
to  the  bonds  and  Treasury  notes  issued  subse¬ 
quently  under  the  acts  of  July  and  August, 
1861. 

During  the  summer  and  winter  of  1861  an 


7 


effort  was  made  by  Mr.  Chase,  the  then  Secre¬ 
tary  of  the  Treasury,  to  carry  on  the  war  under 
a  system  of  specie  values.  The  banks  of  New 
York  had  promised  to  loan  him  a  sum  which 
he  supposed  to  be  sufficient  for  his  purposes. 
In  his  report  of  December,  1801,  he  states  that 
he  had  borrowed  $197,000,000  and  had  an  en¬ 
gagement  with  the  banks  to  borrow  $50,000,000 
more.  This  loan  was  to  cost  him  a  little  less 
than  six  and  a  half  per  cent,  interest. 

This  was  a  gold  loan,  and  the  proceeds  car¬ 
ried  two  or  three  times  the  purchasing  power 
of  subsequent  loans  contracted  in  paper  cur¬ 
rency.  In  this  report  Mr.  Chase  takes  occa¬ 
sion  to  say  : 

“  This  rate  of  interest  is,  however,  higher  than  the 
United  States  with  their  vast  and  accumulating  re¬ 
sources  ought  to  pay.  No  doubt  reasonably  exists, 
that  after  the  reestablishment  of  union  and  order, 
the  five  percent,  bonds  of  the  United  States  will  com¬ 
mand  a  premium  in  the  markets  of  tho  world  unless 
the  national  debt  be,  in  the  meantime,  augmented 
beyond  necessity  or  reason.” 

It  will  be  remembered  that  Mr.  Chase,  at  this 
time,  did  not  contemplate  the  issue  of  legal- 
tender  notes,  if  issued  at  all,  he  thought  they 
ought  t.o  be  payable  in  coin.  Having  argued 
the  advantages  and  disadvantages  of  such  an 
issue,  he  declined  to  recommend  its  adoption. 
Instead  thereof  he  recommended  the  present 
national  bank  system  ;  but  as  that  involved  the 
withdrawal  of  the  iState  bank  notes,  and  the 
reorganization  of  the  capital  of  the  country, 
the  process  would  be  too  slow  to  meet  the 
pressing  exigencies  of  the  war. 

Mr.  Chase’s  good  intentions  were  utterly 
frustrated  by  the  sudden  suspension  of  specie 
payments,  and  the  consequent  failure  of  capi¬ 
talists  to  loan  him  money  as  they  had  promised. 
Hence  came  the  necessity  lor  the  act  of  Feb¬ 
ruary  25,  18G2.  If  the  war  could  have  been 
conducted  on  the  specie  standard  of  value,  as 
1  confess  I  desired,  our  public  debtto-day  would 
probably  be  one  thousand  millions  less  than  it 
is.  The  Secretary  estimated  the  amount  ofgold 
in  the  country  at  that  time  to  be  $275,000,900, 
and  with  that  basis  of  credit,  until  the  suspen¬ 
sion  of  specie  payments,  he  entertained  hopes 
of  procuring  money  by  negotiating  loans.  Upon 
the  suspension,  however,  this  gold  suddenly 
disappeared,  and  nothing  was  left  to  conduct 
the  operations  of  the  war  except  depreciated 
State  bank  paper.  Gold  was  absolutely  demone¬ 
tized,  and  something  must  be  substituted  in  its 
place.  It  could  not  be  a  paper  convertible 
into  gold,  because  the  Government  being  a 
borrower  could  not  pay  specie  on  demand. 

The  people  needed  and  must  have  a  circu¬ 
lating  medium,  it  was  the  duty  of  the  Gov¬ 
ernment  to  furnish  it  to  them.  In  doing  so  a 
new  policy  was  inaugurated  for  which  the  peo¬ 
ple  are  grateful,  but  the  movers  of  it  seem  not 
to  realize  it.  The  State  bank  paper  of  that 
day  was  estimated  at  $202,000,000,  $150,000,- 
000  of  which  was  in  the  loyal  States.  This 
paper  suddenly  became  depreciated  in  value, 


and  the  security  of  business  operations  de¬ 
manded  a  currency  sustaining  a  better  credit, 
Hence  we  now  see  that  the  Government  could, 
with  the  greatest  possible  safety,  and  without 
harm  to  any  material  interest,  have  issued  at 
once  $425,000,000  of  legal-tender  notes.  But 
the  world  has  long  since  learned  to  shudder  at 
the  bare  mention  of  Government  issues.  Rea¬ 
soning  from  false  premises,  people  assume  that 
these  issues  must  depreciate  in  value.  Neces¬ 
sity  forced  our  statesmen  to  do  something,  but 
they  did  as  little  as  they  dared.  It  was  sharp 
necessity  that  gave  birth  to  this  invention  and 
saved  the  country.  It  became  the  entering 
wedge  of  a  great  policy.  These  gentlemen 
shrank  back  from  the  policy  in  its  full  and 
necessary  proportions,  and  temporized  with 
the  exigency  by  issuing  only  $150,000,000. 
These  notes,  however,  fortunately  received  the 
impress  of  the  Government,  and  took  the  legal 
value  of  coin  itself.  It  was  the  national  money, 
and  is  the  national  money  yet,  to  the  entire 
satisfaction  of  the  neople.  The  notes  were 
made — 

“Receivable  in  payment  of  all  taxes,  internal  du¬ 
ties.  excises,  debts,  and  demands  of  every  kind  due 
to  the  United  States,  except  duties  on  imports,  and 
of  all  claims  and  demands  against  the  United  States 
of  every  kind  whatsoever,  except  for  interest  upon 
bonds  and  notes,  which  shall  be  paid  iu  coin 

and  they  were  further  declared  to  be — 

“Lawful  money  and  a  legal  tender  in  payment  of 
all  debts,  public  and  private,  within  the  United 
States,  except  duties  on  imports  and  interest  as  afore¬ 
said.” 

To  this  act,  in  my  judgment,  can  be  given 
but  one  interpretation.  These  notes  could  not 
be  used  by  the  Government  for  paying  interest 
upon  bonds,  because  it  was  stipulated  by  the 
act  itself  that  the  interest  should  be  paid  in 
coin.  If  the  act  contained  no  other  express 
provision  on  the  subject  than  the  stipulation  to 
pay  interest  iu  coin,  then,  by  force  of  a  very 
familiar  rule  of  construction,  the  principal  of 
the  bonds  could  be  discharged  in  paper.  But, 
as  if  to  exclude  any  other  conclusion,  it  is 
provided,  as  I  have  said,  that  they  shall  be 
“a  legal  tender  in  -payment  of  all  debts”  to 
the  Government  except  duties  on  imports,  and 
also  a  legal  tender  for  all  debts  against  the 
Government  except  interest  as  aforesaid.  If 
it  were  possible  to  give  strength  to  this  con¬ 
struction,  an  argument  is  furnished  in  the  pro¬ 
visions  of  a  subsequent  section  to  create  a  sink¬ 
ing  iund,  which  provide  for  “the  payment  in 
coin  of  the  interest  on  the  bonds,”  but  simply 
for  the  “payment  or  purchase”  of  the  bonds 
themselves,  dropping  the  words  “in  coin.” 

In  further  proof  of  the  intention  of  the  Legis¬ 
lature  in  this  behalf  the  provisions  of  the  act 
of  March  3,  18G3,  are  in  point.  Under  this 
act  legal-tender  notes  were  issued  with  inter¬ 
est  payable  in  currency.  Jt  was  unnecessary 
to  specify  how  the  principal  should  be  paid. 
This  had  been  provided  lor  under  the  previous 


8 


act  of  1802.  Being  a  debt  of  the  United  States 
the  principal  was  payable  in  lawful  money. 
Id  was  thought  necessary  to  be  specific,  how¬ 
ever,  in  regard  to  the  payment  of  interest, 
for  otherwise  the  interest  might  be  held  pay¬ 
able  only  “in  coin,”  because  United  States 
notes  had  not  been  made  “  legal  tender”  in 
payment  of  interest  “on  bonds  and  notes.” 

It  will  also  be  remembered  that  similar  pro¬ 
visions  are  to  be  found  in  the  acts  of  June  80, 
1804,  and  March  8,  1865,  under  which  legal- 
tender  Treasury  notes  were  issued,  principal 
and  interest,  to  be  paid  in  currency,  and  ail 
fundable,  at  the  option  of  the  holder,  into  five- 
twenty  bonds.  These  acts  show  an  entire 
abandonment  of  this  specie  standard.  The  cou¬ 
pon  and  compound- interest,  notes,  although 
made  a  legal  tender  for  their  face  value,  were 
expressly  redeemable  in  paper. 

in  further  proof  of  the  position  assumed,  that 
it  is  lawful  to  pay  the  live-twenties  and  other 
securities  in  currency,  the  act  of  March  8,  1804, 
is  referred  to,  under  which  the  ten-forties  were 
issued.  That  act  contemplates  a  different  sort 
of  bond,  and  therefore  provides  in  express 
terms  that  both  principal  and  interest  shall  be 
paid  in  coin.  As  both  prior  and  subsequent 
acts  provided  for  paying  interest  in  coin,  but 
were  silent  as  to  the  principal,  it  must  be  sup¬ 
posed  that  the  omission  in  those  acts  was  in¬ 
tentional,  and  in  the  absence  of  an  express 
provision,  they,  like  all  other  debts,  could  bo 
properly  discharged  in  whatever  the  Govern¬ 
ment  might  stamp  as  lawful  money  and  de¬ 
clare  to  be  a  legal  tender. 

i  have  just  stated  that  distinguished  states¬ 
men,  remembering  John  Law,  the  South  Sea 
bubble,  continental  money  and  French  assig¬ 
nats,  the  history  of  which  had  nothing  in  com¬ 
mon  with  our  case,  approached  this  question 
with  exceeding  reluctance.  But  the  times  were 
exacting,  and  stern  necessity  enforced  the  per¬ 
formance  of  duty.  The  five-twenty  loan  pro¬ 
vided  for  in  this  act  could  not  be  negotiated. 
Money  must  be  had.  The  previous  act  had  pro¬ 
vided,  out  of  very  abundant  caution,  that  the  de¬ 
mand  notes  and  United  States  notes  together 
should  at  no  time  exceed  the  sum  of  $150,000,- 
000.  On  the  17th  March,  1802,  it  became  neces¬ 
sary  to  modify  this  act  by  declaring  that  all  de¬ 
mand  notes  outstanding  should  be  made  legal 
tender  also.  This,  too,  proved  insufficient. 
Before  the  adjournment  of  the  same  session, 
to  wit,  on  the  11th  July,  1802,  another  issue 
of  $150,000,000  was  authorized.  As  was  shown 
by  the  Senator  from  Ohio  the  five- twenty  loan 
was  not  yet  fioated.  There  was  no  surplus 
money  even  yet  to  invest  in  bonds,  and  the 
Government  stepped  in  to  furnish  such  money 
by  means  of  its  credit.  Even  this  additional 
issue  proved  to  be  insufficient ;  and  on  the  17th 
of  January  following  another  $100,000,000 
were  authorized  and  immediately  issued.  Then 
came  the  act  of  March  8,  1808,  authorizing  an 
issue  of  $50,000,000  more,  or,  as  expressed  in 


the  act,  $150,000,000,  including  the  $100,000,- 
000  of  the  previous  January. 

It  is  a  mistake  to  suppose  that  this  latter 
act  or  any  other  act  put  a  limit  to  the  issue 
of  legal-tender  notes.  So  far  from  doing  so, 
the  third  section  of  this  act  of  March,  1808, 
provided  for  the  issue'  of  $400,000,000  of 
Treasury  notes,  which  the  Secretary  of  the 
Treasury  was  authorized  to  make  legal  tenders 
for  their  face  value,  and  of  which  he  issued 
and  stamped  immediately  thereafter  from  one 
hundred  and  fifty  to  tw*o  hundred  million  dol¬ 
lars.  Previous  to  this  act  United  States  notes 
could  be  funded,  but  now  the  right  was  to  bo 
withdrawn  after  the  1st  of  July  following,  and 
thenceforth  they  were  to  remain  a  permanent 
circulating  medium,  and  did  so  remain  until 
the  act  of  April  12,  1806,  when  the  fatal  policy 
of  contraction  was  inaugurated. 

it  was  not  until  June  80,  1804,  that  Congress 
adopted  the  limitation  upon  the  issue  of  green¬ 
backs  in  the  following  words: 

“  Nor  shall  tho  total  amount  of  United  States  notes, 
issued  or  to  be  issued,  ever  exceed  $400,000,000,  and 
such  additional  sum  not  exceeding  $50,000,000,  as  may 
be  temporarily  required  for  theredemption  of  tempo¬ 
rary  loan.’’ 

Let  it  not  be  forgotten  that  this  act  of  June 
80,  1804,  which  is  so  often  quoted  to  the  detri¬ 
ment  of  the  country,  and  which  is  claimed  to 
have  transferred  to  our  creditors  a  part  of  the 
national  sovereignty,  instead  of  limiting  the 
issue  of  legal-tender  notes,  actually  contained 
a  provision  to  increase  the  issue  $200,000,000. 
It  is  true  they  were  not  called  United  States 
notes,  but  Treasury  notes. 

Mr.  SHERMAN.  They  bore  interest. 

Mr.  HENDERSON.  1  am  aware  of  that. 
They  might  bear  interest  from  the  one  hun¬ 
dredth  part  of  one  per  cent,  to  seven  and  three 
tenths  per  cent,  in  lawful  money,  and  be  made 
payable  at  any  time  not  exceeding  three  years. 
But  if  payable  three  years  from  date  they  were 
to  be  made  expressly  a  legal  tender  to  the  same 
extent  as  United  States  notes  for  their  face 
value.  It  must  not  be  forgotten,  either,  that 
the  Secretary  availed  himself  of  the  authority 
and  issued  the  lull  amount  with  the  Govern¬ 
ment  stamp  of  lawful  money.  And  yet  the  Sen¬ 
ator  from  Ohio  tells  me  that  somehow  or  other 
there  is  a  limitation  upon  legal  tenders. 

Mr.  SHERMAN.  1  did  not  say  legal  tenders ; 
of  United  States  notes. 

Mr.  HENDERSON.  They  are  all  the  same. 
There  is  no  difference.  They  were  used  as 
curren  cy. 

Now,  Mr.  President,  is  it  not  a  little  ex¬ 
traordinary  that  the  very  able  and  sagacious 
Senator  from  Ohio  so  promptly  yields  to  the 
j  suggestion  that  the  Government  is  in  honor 
j  bound  never  to  enlarge  the  legal  tender  cir¬ 
culation  beyond  $406,000,000?  He  says  this 
would  be  bad  faith.  He  himself  has  conclu¬ 
sively  shown  that  scarcely  any  bonds  were 
negotiated  until  the  full  limit  of  United  States 
1  notes  had  been  issued.  I  have  already  shown 


9 


that  when  that  limit  was  reached  there  had 
been  issued  and  negotiated  about  $200,000,000 
of  five  per  cent,  coupon  notes,  which  were  also 
a  legal  tender,  and  which  we  know  flowed 
readily  into  the  channels  of  circulation.  That 
Senator  should  also  remember  that  before 
the  limitation  of  June,  1864,  was  enacted  the 
$200,000,000  compound-interest  notes  were 
authorized  and  immediately  issued,  and  they, 
too,  for  some  time  swelled  the  volume  of  cur¬ 
rency. 

liy  examining  these  acts  of  Congress  it  will 
be  seen  that  on  the  1st  day  of  July,  1864, 
$1,050,000,000  of  legal-tender  notes  had  been 
authorized,  and  not  only  were  these  issues  au¬ 
thorized,  but  the  authority  was  most  liberally 
exercised.  By  looking  to  the  reports  of  the 
debt  it  will  be  seen  that  there  were  issued  and 
put  in  circulation  the  following  amounts  of 
legal  tender,  namely  : 


United  States  notes .  $432,000,000 

Coupon  five  per  cent,  notes .  201,000,000 

Compound  interest  notes .  217,000,000 


Total .  $850,000,000 


I  am  aware  that  the  coupon  notes  were  with¬ 
drawn  as  rapidly  as  possible,  but  they  were  not 
withdrawn  until  they  had  effected  the  purpose 
for  which  they  were  issued,  to  wit :  the  sale  of 
Government  bonds. 

It  seems,  then,  that  this  charge  of  bad  faith 
is  unfounded.  If  the  bondholders  purchased 
their  bonds  with  an  outstanding  issue  of  from 
$600,000,000  to  $850,000,000  of  legal  tender, 
what  right  have  they  to  complain  if  the  legal 
tendershould  be  again  increased  to  thatamount. 

Bad  faith  implies  that  a  promise  is  broken. 
But  there  must  be  something  more  than  this. 
Somebody  must  be  injured  by  the  breach. 
If  it  be  insisted  that  no  more  greenbacks 
or  United  States  notes  can  be  put  into  cir¬ 
culation,  but  that  Treasury  notes  may  be 
issued  ad  libitum ,  then  the  alleged  promise  i3 
utterly  worthless.  The  truth  is,  the  public 
creditors  purchased  the  securities  as  cheap  as 
they  could  obtain  them.  They  purchased  them 
with  their  eyes  open,  subject  to  ail  the  hazards 
of  military  success,  and  no  less  subject  to  such 
enactments  of  Congress  as  in  its  judgment  the 
public  good  might  demand.  They  who  had 
means  deserve  credit  for  aiding  the  country  in 
the  hour  of  its  peril ;  and,  now  that  imminent 
danger  has  passed,  it  would  be  no  less  dishonest 
than  ungrateful  to  repudiate  our  obligations. 
Such  a  thing  cannot  and  will  not  be  seriousljr 
entertained  by  any  considerable  number  of 
men  claiming  to  be  honest  or  respectable.  But 
there  are  two  classes  of  people  equally  entitled 
to  our  consideration  in  this  matter — the  debtor 
and  the  creditor  classes.  While  we  deprive  the 
creditor  of  no  part  of  his  honest  earnings,  we 
must  be  careful  that  we  do  nothing  to  oppress 
the  debtor  by  making  it  more  difficult  to  pay 
than  when  the  debt  was  contracted.  While  we 
should  not  clip  the  coin  or  deteriorate  the  cur¬ 


rency  for  the  mere  purpose  of  confiscating  a 
part  of  the  creditor's  claim,  we  should  boldly 
assert  the  right,  inalienable  by  the  Government, 
to  regulate  the  currency  for  the  public  good, 
and  especially  should  we  avoid  such  contraction 
of  it  as  to  oppress  the  debtor  class  or  rob  them 
of  the  means  of  payment.  We  should  do 
nothing  to  take  away  the  value  of  the  debt  in 
the  hands  of  the  holders;  but  those  who  have 
to  pay  that  debt  should  be  heard  in  their  pro¬ 
tests  against  giving  it  increased  relative  value 
by  the  mere  force  of  legislation. 

It  must  be  borne  in  mind  that  at  this  date 
(I  mean  in  1864)  eleven  States  were  in  a  state 
of  rebellion,  and  their  citizens  did  not  use  our 
currency  except  at  points  reduced  into  our  pos¬ 
session.  Those  States,  in  1860,  contained  a 
population  of  9, 103, 333.  Deducting  this  from 
the  entire  population,  leaves  22,339,880  for  the 
loyal  States  and  Territories.  Allowing  for  the 
natural  increase  of  population,  and  we  had  in 
the  loyal  States,  using  the  currency  issued 
by  the  Government,  say  twenty-live  million 
people — and  it  must  not  be  forgotten  that 
nearly  one  million  of  our  most  active  and  ener¬ 
getic  men  were  withdrawn  from  business  pur¬ 
suits  and  engaged  in  the  war — but,  allowing 
for  the  entire  loyal  population,  we  had  an 
authorized  issue  of  legal- tender  notes  on  the 
30th  of  June,  1864,  of  forty-two  dollars  per 
capita ,  and  an  actual  subsequent  issue  of  nearly 
twenty-five  dollars  per  capita. 

The  Secretary  of  the  Treasury  tells  us  that 
this  large  issue  caused  its  depreciation.  If  so, 
capitalists  bought  it  cheaply,  and  having  ob¬ 
tained  it,  converted  it,  as  they  had  a  right  to 
do,  in  Government  bonds  at  six  per  cent,  gold 
interest.  It  is  now  proposed  to  limit  the  legal 
tenders  to  $400,000,000.  Rebellion  has  been 
crushed.  The  supremacy  of  the  Government  is 
again  established,  and  instead  of  25,000,000 
people  we  have  not  less  than  37,000,000  to  day 
using  the  currency  issued  by  the  Government. 
Nor  is  it  now  as  it  was  before  the  war  or  during 
thevvar.  Then  the  slaves  had  no  use  for  money. 
They  are  now  freemen,  and  take  their  places 
in  all  business  operations.  The  proposition  to 
limit  the  legal-tender  issues  to  $400,000,000 
gives  us  only  $10  81  per  capita. 

If  we  should  now  issue  legal  tenders  to  the 
same  amount  per  capita  as  authorized  on  the 
1st  day  of  July,  1864,  we  should  have  the  start¬ 
ling  sum  of  $1,554,000,000. 

By  reference  to  the  Treasury  reports  of  the 
past  we  find  the  legal-tender  Treasury  notes 
excluding  demand  notes,  and  in  actual  circu¬ 
lation  at  different  periods,  to  be  as  follows: 

June  30, 18G3 . $389,6S6,7C2  00 

JuueSO,  1S64 .  599,050,120  84 

June  30, 1865 . 603,782,750  00 

June  30, 1860 .  503,085,5(0  00 

June  30, 1807 .  495,301,70/  00 

December  1, 1807 . .  426,230,690  00 

February  1, 1808 .  409,804,297  00 

I  have  just  said  that  other  forms  of  circu¬ 
lating  medium  existed,  during  this  period, 


10 


beside  the  legal-tender  notes.  I  have,  with 
some  care,  prepared  tabular  statements,  show¬ 
ing  the  amount  of  currency  in  all  its  forms 
during  the  period  when  our  national  debt  was 
being  contracted. 

Amount  of  Currency  at  different  periods. 


Excluding  tem¬ 
porary  loans, 
certificates  of 


Including  temporary  loans  and 
cerfieates  of  indebtedness. 

UtT  LI  1J  VJcl  l  v.o  Ul 

indebtedness, 
and  seven- 
thirty  Treas¬ 
ury  notes  af¬ 
ter  Juno  30, 
1865. 

June  SO,  1863 . 

June  30,  1864 . 

June  30,  1865 . 

June  30,  1866 . 

June  30,  1867 . 

Excluding  seven - 
December  1.  1807.. 
February  1, 1868... 

$1,048,156,476  19 
1,047,742,005  50 
1,344,339,727  16 
1,269,854,006  96 

1 59,299,795  43 
thirty  notes. 

793,494,137  70 
•  799,714,641  06 

$786,303  936  00 
814,082,814  06 
1,138,850,665  76 
888,886.810  96 
839,038,725  43 

790,582,237  15 
689,435,065  51* 

I  have  already  said  that  upon  the  suppres¬ 
sion  of  the  rebellion  the  wealth,  population, 
and  business  of  the  seceding  States  came  in  to 
share  with  us  the  use  of  our  currency. 

Assuming  that  a  certain  amount  of  money 
was  needed  by  the  loyal  people  during  the 
rebellion,  surely  a  larger  amount  is  needed 
when  an  additional  population  of  between  nine 
and  ten  millions  has  to  be  supplied.  If  a  cer¬ 
tain  volume  of  the  circulating  medium  were 
necessary  for  the  exchanges  of  twenty-six 
States,  surely  a  greater  amount  is  necessary 
to  facilitate  the  business  operations  of  thirty- 
seven  States,  with  an  added  aggregate  wealth 
of  not  less  than  $5,000,000,0(10.  Instead  of 
increasing  the  currency  in  proportion  to  this 
extended  field  of  operations,  the  Secretary  of 
the  Treasury  saw  fit  to  adopt  directly  the  oppo¬ 
site  policy.  His  language  is  the  key-note  of 
this  whole  system  of  contraction,  and  I  refer  to 
it  at  the  risk  of  being  tedious.  In  bis  report 
of  December,  1865,  after  alluding  to  the  power 
of  Congress  to  borrow  money,  he  says : 

“But  their  authority  to  issue  obligations  for  a 
circulating  medium  as  money  and  to  make  these  ob¬ 
ligations  a  legal  tender,  can  only  be  found  in  the 
unwritten  law  which  sanctions  whatever  the  Repi*e- 
sentatives  of  the  people,  whose  duty  it  is  to  maintain 
the  Government  against  its  enemies,  may  consider 
in  a  great  emergency  necessary  to  be  done.” 

Ho  therefore  expresses  his  opinion  that  the 
legal  tender  act — 

“Ought  not  to  remain  in  force  one  day  longer  than 
shall  bo  necessary  to  enable  the  people  to  prepare 
for  a  return  to  the  constitutional  currency.” 

And,  with  a  view  of  securing  this  desirable 
result,  he  says : 

“The  Secretary  believes  that  a  decided  movement 
toward  a  contraction  of  the  currency  is  not  only  a 
public  necessity,  but  that  it  will  speedily  dissipate 
the  apprehension  which  very  generally  exists,  that 
the  etieet  of  such  a  policy  must  necessarily  be  to 
make  money  scarce  and  to  diminish  tfie  prosperity 
ol  the  country.” 


*This  amount  excludes  gold  certificates,  five  per 
cent,  compounds,  three  years’,  six  per  cent.,  com¬ 
pounds.  and  three. per  cent,  certificates. 


So  earnest  and  zealous  did  the  Secretary 
become  at  this  time,  in  pressing  upon  Con¬ 
gress  the  evils  of  an  inflated  currency,  that  he 
imagined  danger  to  exist  in  the  precious  metals 
themselves.  He  says : 

“Even  in  the  form  of  the  precious  metals  it(money( 
may  not  prove  to  bo  wealth  to  a  nation.  The  idea 
that  a  country  is  necessarily  rich  in  proportion  to  the 
amount  of  gold  or  silverwhich  it  possesses,  is  a  com¬ 
mon  and  natural,  but  an  erroneous  one,”  &c. 

I  do  not  stop  to  comment  on  these  extraordi¬ 
nary  views.  If  they  are  correct,  the  world  has 
been  mistaken  from  the  dawn  of  civilization  to 
the  present  time.  Political  economists  tell  us 
that  a  nation  is  rich  and  prosperous  in  propor¬ 
tion  as  the  products  of  its  industry  exceed  its 
consumption  and  flow  abroad  to  bring  in  re¬ 
turn  a  stream  of  the  precious  metals.  I  have 
been  taught  to  believe  that  the  development 
of  the  mines  of  Mexico  tended  largely  to  re¬ 
lieve  the  world  of  the  ignorance,  superstition 
and  oppression  following  the  dark  ages  and 
greatly  to  ameliorate  the  condition  of  man¬ 
kind. 

I  had  supposed  that  the  $3,000,000,000  of 
gold  currency,  added  to  the  circulation  of  the 
world  during  the  last  twenty  years  had  quick¬ 
ened  industry,  stimulated  enterprise,  devel¬ 
oped  new  fields  of  hidden  wealth,  and  largely 
added  to  the  comforts  of  men.  I  had  sup¬ 
posed,  too,  that  it  was  the  interest  of  each  na¬ 
tion  by  honest  industry  to  accumulate  as  much 
of  this  gold  and  silver  as  it  possibly  could.  If 
money  is  abundant  interest  is  low.  Wherever 
the  rates  of  interest  are  cheap,  the  people 
prosper.  Wherever  the  rates  are  high  every 
ten  or  fifteen  years  debtors  go  to  protest,  and 
capitalists  say  the  country  has  overtraded  itself. 
They  mistake.  The  people  have  paid  too 
much  interest.  That  is  all. 

But  before  I  pass  away  from  the  subject  of 
currency,  I  call  the  attention  of  the  Senate 
to  a  statement  which  I  have  prepared  myself 
showing  the  amount  of  circulation  per  capita . 
and  for  each  $1,000  of  wealth  in  the  country 
at  different  periods  since  1863.  If  there  be 
error  in  this  statement,  it  is  because  it  is  not 
sufficiently  liberal  to  the  view  I  am  attempting 
to  enforce.  In  ascertaining  the  population  and 
wealth  of  the  two  sections  and  of  the  whole 
country  since  1860,  I  have  taken  the  ratio  of 
increase  as  developed  in  our  past  history.  That 
portion  of  the  seceding  States  not  using  our  cur¬ 
rency  during  the  existence  of  flagrant  war  has 
been  excluded  from  the  estimates  until  the  sup¬ 
pression  of  the  rebellion  in  1865,  after  which 
period  it  has  been  admitted  into  the  calcula¬ 
tion.  The  following  table  contains  the  esti¬ 
mates,  namely : 

Per  capita  amount  of  legal-tender  circulation  at  dif¬ 
ferent  periods. 


June  30, 1863 . $15  85 

June  30,  1864... .  23  71 

June  30, 1865 .  18  23 

June  SO,  1886 .  14  92 

June  30,  1867 .  12  77 

December  1.  1867 .  10  96 

February  1, 1888 .  10  28 


11 


The  following  is  the  amount  of  the  entire 
paper  circulation  of  t lie  United  States  used  as 
a  medium  of  exchange  at  different  periods, 
including  the  legal-tender  notes: 


a 

o 

© 

P 

S 

3 

3 

3 

a" 

o 

3 

3 

3 

3 

3 

• 

• 

© 

© 

© 

© 

© 

h~ A 

CO 

CO 

03 

co 

co 

ti 

►— * 

►— * 

o 

© 

o 

© 

o 

p 

03 

GO 

t — * 

►— » 

►— » 

>— A 

h— * 

c+- 

w) 

03 

CO 

OO 

OO 

OO 

GO 

C3 

C3 

03 

© 

© 

C3 

Cm 

CO 

i 

: 

: 

: 

: 

<“*-  CLO 


H 

O  o 


to 

to 

tO 

£3 

CO 

j- 

O 

o 

to 

© 

H-A 

to 

O 

h-A 

© 

© 

CO 

<y> 

03 

cm 

cm 

© 

© 

00 

C" 

kA  rn  O  Zj 
“  o 

3  a  Er 
Y‘  3  5*3 


CO 

fe 

• 

-T 

4* 

00 

tf* 

00 

© 

Cm 

O 

C Ti 

o 

ti¬ 

© 

CO 

GO 

C7i 

h-» 

23 

cs 

OO 

CO 

CO 

-4 

►—a  3 

O-5 
O  -i 

o' < 


*3  2  —'3 
c3:c- 


hO 

to 

to 

CO 

CO 

=€# 

CO 

O 

Ui 

CO 

H“A 

to 

r— a 

CO 

CO 

00 

Cm 

o 

H-A 

Cm 

03 

o 

© 

cm 

■20 

*-<  O  CD 


p  £5 


-S 

VJ 


J>P 

o 


•  © 

S  c*  ©  ^ 


I  l  »  1 


Suppose,  now,  we  inflate  the  currency  to  the 
amount  per  capita  as  it  stood  at  the  several 
periods  named,  excluding  everything  that  was 
not  an  admitted  elementof  circulation.  What 
amount  shall  we  have  ? 


On  the  basis  of— 

Amount  of 
legal  tenders 
alone. 

Total 

a  m’nt  of  legal 
tenders,  bank 
notes,  and 
other  notes. 

June  30, 1803 . 

$638,000,000 

921.000,000 

710,000.000 

582.000.000 

498.000.000 

427,000,000 

$1,232,000,000 

1.254,000,000 

1,210,000,000 

918,000,000 

850,000,000 

794,000,000 

June  SOI  1861 . 

June  30, 1865 . 

June  30, 1866 . 

June  30, 1867 . 

December  1,  1867  . 

If  it  be  said  that  some  of  these  forms  of 
Government  credit  did  not  constitute  a  circu¬ 
lating  medium  or  answer  the  purposes  of  money, 
1  answer  that  in  the  table,  excluding  the  certifi¬ 
cates  and  temporary  loans,  nothing  is  included 
except  admitted  circulation.  The  coupon  and 
compound-interest  notes  were  intended  to  be 
a  circulating  medium.  It  was  hoped  that  their 
interest  would  soon  weigh  them  down  as  an 
investment  and  take  away  their  currency  char¬ 
acter,  but  we  all  know  they  were  not  removed 
until  the  ends  of  their  existence  had  been  fully 
accomplished.  The  purpose  was  to  sell  Gov¬ 
ernment  bonds  at  par,  the  discount  of  the  bond 
to  be  covered  up  in  the  depreciation  of  the  note. 


Mr.  Fessenden,  then  Secretary  of  the  Treas¬ 
ury,  in  his  report  of  18G4,  tells  us  that  he  could 
not  negotiate  a  loan  in  New  York  to  meet 
pressing  demands  of  the  Government.  He 
informs  us  that  suspended  requisitions  so  ac¬ 
cumulated  on  his  hands  that  he  “was  com¬ 
pelled,”  (I  quote  his  own  words) — 

“To  replace  the  whole  amount  of  fire  per  cent, 
notes  which  had  been  canceled,  amounting  to  more 
than  eighty  million  dollars,  and  even  slightly  to  ex¬ 
ceed  that  sum.” 

And  again  he  says  : 

“More  fully  to  accomplish  his  purpose,  the  Secre¬ 
tary  resolved  to  avail  himself  of  a  wish  expressed  by 
many  officers  and  soldiers  through  tlm  paymasters, 
and  offered  to  such  as  desired  to  receive  them  seven- 
thirty  notes  of  small  denominations.” 

The  Secretary  then  proceeds  to  say  that  he 
disposed  of  exceeding  twenty  million  dollars 
ot  these  small  seven-thirty  notes  to  the  soldiers 
alone.  After  the  currency  had  thus  become 
inflated  Mr.  Fessenden  tells  us  that  lie  put 
upon  the  market  a  loan  of  $32,000,000,  upon 
which  bids  to  nearly  seventy  millions  were  re¬ 
ceived,  and  the  proposed  loan  was  negotiated 
at  a  premium  of  over  four  per  cent. 

What  objection  to  negotiating  new  loans 
now  in  the  same  manner,  to  take  up  this  six 
percent,  debtthat  daily  gnaws  at  the  very  vitals 
of  industry?  To  negotiate  a  loan  then  it  was 
legitimate  to  issue  nearly  ninety  millions  of 
new  legal  tenders,  carrying  no  weight  of' accu¬ 
mulated  interest,  and  many  more  millions  of 
small  seven- thirty  notes  payable  to  bearer. 

Do  Senators  ask  me  if  I  would  increase  the 
currency  to  the  amount  in  circulation  during 
the  war?  My  answer  will  depend  on  the  policy 
adopted  by  Congress  in  reference  to  this  debt. 

1  will  not  shrink  from  paying  it.  No,  not  one 
farthing  shall  be  abated  with  my  consent.  I 
will  not  only  give  the  pound  of  flesh  if  de¬ 
manded,  but  I  will  consent  that  some  drops 
of  “  Christian  blood”  may  be  spilled.  If  the 
bonds  were  purchased  at  from  fifty  to  seventy 
cents  to  the  dollar,  it  is  quite  easy  to  so  regulate 
the  interest  as  to  do  justice  to  debtor  and 
creditor.  I  will  even  waive  the  terms  of  the 
contract  and  admit  payment  in  gold  to  be  oblig¬ 
atory,  provided  the  creditors  will  reduce  the 
interest  so  as  to  compensate  for  appreciating 
their  bonds  even  from  71,  ihe  present  value,  to 
the  par  of  gold. 

Through  the  kindness  of  Mr.  Elliott,  of  the 
Treasury  Department,  I  am  enabled  to  append 
carefully  prepared  tables,  furnished  at  my  re¬ 
quest,  showing  the  value  of  securities  at  from 
one  to  six  per  cent.,  and  for  different  periods 
from  five  to  fifty  years,  the  interest  to  be  paid 
semi-annually.  From  these  it  will  bo  seen 
that,  if  a  six  per  cent,  ten-year  bond,  interest 
paid  semi-annually,  is  worth  only  71,  the  rate 
per  cent,  on  a  par  bond,  assuming  money  to 
be  worth  six  per  cent.,  should  be  a  little  over 
two  per  cent. 

If  six  per  cent,  ten-year  bonds,  interest  paid 
semi-annually,  are  depreciated  to  73.0(3,  (lie 
par  bond  at  two  and  a  half  per  cent,  is  equal 
to  it  in  value,  the  current  rate  of  interest  being 
six  per  cent.  The  depreciated  bond  worth 


12 


77.08  raised  to  a  par  value  can  afford  to  take 
three  per  cent.  The  six  per  cent,  bond,  worth 
81.40,  when  carried  to  par,  can  take  three  and 
a  half  percent.  And  now,  if  the  public  secur¬ 
ities  were  worth  to-day  85.12,  in  gold,  the 
holders  must  reduce  their  interest  to  four  per 
cent. ,  if  the  debt  is  agreed  to  be  paid  in  gold. 
The  proposition  to  fund  at  five  per  cent., 
assumes  that  the  debt  is  worth  92.50.  It  is 
not  worth  so  much,  and  the  creditors  paid  no 
such  sum  for  it. 

But  1  am  told  we  cannot  adopt  compulsory 
measures,  but  must  leave  the  creditors  to  change 
their  securities  or  not,  as  they  like.  Th6  Sen¬ 
ator  from  Ohio  admits  that  the  issue  of  more 
currency  will  enable  us  to  contract  loans  at 
lower  rates.  If  the  creditors  refuse  to  fund  on 
fair  terms  I  would  not  fund  at  all,  but  adopt 
such  policy  as  will  enable  us  to  take  up  the 
securities  as  they  mature.  If  the  circulation 
be  reasonably  expanded,  the  people  can  pay 
larger  taxes  with  greater  ease  than  they  pay 
the  present  burdens.  And  if  the  creditors  re¬ 
fuse  to  make  better  terms,  let  us  proceed  by 
taxation  and  new  loans  at  three  and  a  half  to 
four  per  cent,  to  take  up  these  six  per  cent, 
bonds  as  they  mature,  which  otherwise  will 
hang  for  centuries  upon  the  energies  of  the 
people. 

The  stereotyped  reply  to  this  course  of  policy 
is  that  depreciated  paper  is  the  greatest  of  ail 
curses.  Now,  a  word  on  this  subject.  I  deny 
it.  A  depreciated  paper  is  bad  enough.  But 
a  six  per  cent,  debt  equal  in  bulk  to  one  eighth 
part  of  a  nation’s  wealth  is  worse.  England 
has  two  noted  institutions,  a  public  debt  and  a 
poor-house  system.  We  now  have  the  former. 
Let  us  beware  that  we  are  not  cursed  with  the 
hitter.  I  have  now  shown  that  an  enlarged 
circulation  has  no  element  of  injustice  in  it  to 
anybody.  The  next  question  is,  will  it  become 
depreciated  and  injure  the  public?  Can  it  be 
demonstrated  by  argument  that  a  circulation 
of  even  $1,000,000,000  in  this  country  will  be¬ 
come  depreciated?  That  is  within  a  few  dol¬ 
lars  of  the  net  amount  of  circulating  notes 
outstanding  on  the  24th  day  of  March,  1866, 
when  gold  fell  to  125.  I  ask  my  friend  from 
Vermont  to  take  that  matter  under  consider¬ 
ation.  It  is  a  fact,  and  I  desire  to  hear  him 
explain  it. 

Mr.  MORRILL,  of  Vermont.  Does  the 
Senator  desire  an  explanation  now? 

Mr.  HENDERSON.  I  should  like  to  hear 
it  now. 

Mr.  MORRILL,  of  Vermont.  It  was  from 
a  thorough  conviction  on  the  part  of  the  whole 
country  and  of  the  members  of  Congress  in  each 
bianch,  that  when  the  war  was  over  a  resump¬ 
tion  of  specie  payments  would  take  place  ;  and 
no  matter  what  the  premium  upon  gold  was  if 
resumption  were  to  take  place,  it  was  sure  to 
come  down  to  par,  and  therefore  the  people 
were  quite  ready  and  willing  under  such  cir¬ 
cumstances  to  take  a  lower  rate  for  gold  than 
they  had  been  only  a  short  time  previously. 

Mr.  HENDERSON.  Then,  Mr.  President, 
this  is  a  mere  question  of  confidence.  I  shou'd 
like  to  aslc  n.y  friend  why  the  people  of  this 


country  would  not  have  a3  much  confidence  in 
a  legal- tender  note  as  they  would  have  in  your 
public  debt,  which  bears  six  per  cent,  interest 
and  weighs  down  their  energies?  If  confidence 
is  all  why  should  they  not  confide  in  a  noteas 
well  as  a  bond? 

Mr.  MORRILL,  of  Vermont.  Because  the 
Government  does  propose  to  pay  the  bond,  and 
does  not  propose  to  pay  the  legal-tender  note. 

Mr.  HENDERSON.  If  it  pays  one  it  will 
pay  the  other.  I  have  been  endeavoring  to 
show  that  at  the  present  rate  of  interest  the 
Government  of  the  United  States  will  not  in 
the  next  century  be  able  to  pay  its  debt.  I 
will  not  trouble  the  Senate  with  running  over 
the  history  of  other  nations  on  this  subject ;  but 
I  think  it  a  clear  proposition,  (and  we  might 
as  well  meet  it  boldly  and  understand  our 
position,)  that,  with  this  large  debt,  with  this 
rate  of  interest,  no  probability  of  payment  is 
apparent.  It  is  a  two-edged  sword  which  not 
only  compels  you  to  pay  heavy  burdens  in  the 
shape  of  interest,  but  it  cramps  industry,  be¬ 
cause  it  tends  to  raise  the  price  of  interest 
between  individuals. 

The  United  States  of  to-day  is  different  from 
the  poor,  struggling  colonies  of  1775,  when  the 
issues  of  continental  money  commenced.  Long 
previous  to  the  Declaration  of  Independence 
each  colony  had  issued  paper  credits  beyond 
its  ability  to  pay,  and  these  paper  credits  wero 
still  in  circulation.  The  population  of  the 
colonies  at  that  time  did  not  exceed  two  mil¬ 
lion  eight  hundred  thousand  persons.  Their 
wealth  could  not  have  exceeded  five  to  six 
hundred  million  dollars. 

The  amount  of  continental  money  issued 
has  never  been  accurately  ascertained.  Mr. 
Hamilton  estimated  it  at  $857,475,541;  Mr. 
Gouge,  in  his  work  on  banking,  states  it  to 
have  been  $337,470,541  ;  an  article  in  the 
Merchants’  Magazine  for  January,  1843,  places 
it  at  $387,476,337  ;  the  amount  reported  by 
the  Treasuiy  Department  to  the  Senate,  in 
1843,  is  estimated  $242,100,176.  It  matters 
not  which  estimate  is  the  correct  one  ;  it  will 
be  readily  perceived  that  no  such  issue,  should 
the  public  debt  be  entirely  converted  into  cir¬ 
culating  notes,  can  be  possibly  made  now.  It 
was  from  eighty-six  to  one  hundred  and  thirty- 
seven  dollars  per  capita ,  and  from  one  half  to 
three  quarters  of  the  entire  property  value  of 
the  colonies.  The  only  thing  surprising  is 
that  the  issue  of  the  first  twelve  months  main¬ 
tained  a  gold  value,  and  that  it  had  only  de¬ 
clined  fifty  per  cent,  at  the  end  of  two  years. 

Our  condition  is  quitedifferent,  too,  from 
that  of  revolutionary  France  when,  on  the  1st 
of  April,  1790,  she  entered  upon  a  system  of 
paper  issues.  The  property  of  France  then 
was  not  one  third  the  amount  of  ours  now, 
and  yet  the  issues  reached  $241,000,000,  with 
a  decline  of  only  ten  per  cent.  ‘‘When  the 
issues  had  reached  $1,000,000,000  the  discount 
was  only  fifty-five  per  cent.  When  they 
reached  the  extraordinary  sum  of  $9,115,000,- 
000 — a  sum  much  greater  than  the  entire  prop¬ 
erty  of  the  kingdom — it  is  not  strange  that  they 
became  utterly  worthless. 


13 


To  determine  the  amount  of  money  de¬ 
manded  by  a  people  we  must  understand  the 
area  of  the  country,  the  mode  and  manner  of 
doing  business,  and  the  proportion  of  the 
population  residing  in  cities  having  bank  fa¬ 
cilities.  In  England  and  France,  where  the 
population  is  dense,  much  less  currency  is 
needed.  Bank  checks  and  bills  of  exchange 
supply  in  a  large  measure  the  place  of  a  cir¬ 
culating  medium. 

These  advantages  are  enjoyed  in  a  much 
less  degree  in  this  country ;  hence  a  larger 
circulation  is  necessary.  The  extent  of  our 
country  is  great,  and  new  Territories  are  being 
rapidly  settled  up,  from  which  communication 
is  exceedingly  difficult.  Another  fact  worthy 
of  consideration  is  that  the  old  credit  system 
between  individuals  is  almost  entirely  aban¬ 
doned.  When  the  Government  supplies  its 
credit  in  sufficient  quantities  individuals  are 
enabled  to  adopt  the  cash  system  in  business, 
and,  even  though  the  Government  credit  should 
fall  below  par,  business  men  are  compensated 
for  this  inconvenience  by  the  advantages  of 
cash  payments.  What  they  lose  in  discount 
on  the  paper  is  less  than  the  probable  loss  on 
failures  of  individual  credit.  Taking  into  con¬ 
sideration,  therefore,  the  character  of  our 
country,  the  activity  and  energy  of  the  people, 
and  the  abandonment  of  the  old  credit  system, 
it  may  be  safely  assumed  that  double  as  much 
circulation  per  capita  can  be  used  here  as  in 
France  or  England. 

In  1864  the  gold  coin  of  England  was  esti¬ 
mated  $400,000,000,  and  that  of  France  at 
$700,000,000.  If  these  estimates  were  correct 
at  the  time,  it  is  safe  to  assume,  looking  at 
our  own  recent  exportations  of  the  precious 
metals,  that  the  amounts  have  been  largely 
increased.  If  we  include  the  silver  coin  and  the 
bank  notes  we  may  set  down  the  circulation  of 
England  at  not  less  than  from  six  hundred  and 
twenty-five  to  six  hundred  and  fifty  million 
dollars.  This  would  furnish  twenty-five  to 
twenty-six  dollars  per  capita.  I  have  but  little 
doubt  that,  the  gold  circulation  of  France  is 
now  equal  to  $800,000,000.  Add  to  this  the 
circulation  of  the  bank  of  France,  and  we  have 
a  per  copita  circulation  about  equal  to  that  of 
England. 

Now,  suppose  the  people  of  the  United  States 
needed  only  as  much  circulation  per  capita  as 
the  people  of  England  and  France,  this  would 
give  us  over  one  thousand  millions. 

I  am  aware  that  the  aggregate  wealth  of  each 
of  those  nations  is  greater  than  ours,  and  that 
fact  mav  modify  my  statement  that  we  can 
profitably  use  twice  as  much  currency  per  cap¬ 
ita  as  they.  But  suppose,  on  account  of  the 
causes  to  which  I  have  alluded,  we  can  use 
three  dollars  to  their  two.  The  circulation 
of  the  United  States  in  that  event  should  be 
$1,500,000,000.  It  is  now  much  less  than  half 
that  amount. 

-  I  know  the  conclusions  arising  from  these 
facts  will  not  be  favorably  received.  The  opin¬ 
ion  of  many  persons  here  and  elsewhere  is  that 
the  old  order  of  things  ante  helium  cannot  safely 
be  departed  from.  We  have  been  told  from  in¬ 


fancy  that  large  issues  of  paper  money  are  dan¬ 
gerous,  and  we  too  readily  confound  a  reason¬ 
able  exercise  with  the  abuse  of  the  privilege. 
We  do  not  take  into  consideration  the  change 
of  circumstances  demanding  a  change  of  pol¬ 
icy.  In  many  things  we  have  been  recently 
educated.  We  may  have  something  to  learn 
yet  in  the  school  of  finance. 

Ever  since  our  circulation  in  this  iron  policy 
of  contraction  fell  beneath  a  thousand  million 
dollars  gold  has  risen  in  the  market.  Instead 
of  reaching  specie  payments,  we  ere  placed  „ 
almost  beyond  the  pale  of  hope  in  that  direc¬ 
tion.  The  reason  is  apparent.  There  is  no 
gold  in  the  country,  perhaps  not  over  $225,- 
000,000.  Hence  present  resumption  by  the 
Government  is  the  merest  dream  of  enthusiasts. 
State  bank  notes  are  prohibited  by  law,  and 
national  bank  notes  are  limited  to  $300,000,000. 
Some  form  of  credit  must  be  furnished  as  a  cir¬ 
culating  medium.  Unless  it  is  furnished  in 
sufficient  quantities  the  productive  energies  of 
the  people  are  cramped.  Money  in  some  form 
is  essential  among  civilized  men  to  the  transac¬ 
tions  of  business  and  the  accumulation  of 
wealth.  It  is  the  nation’s  life-blood,  which 
alone  can  assimilate  raw  material  into  wealth, 
beauty,  and  strength.  Whenever  it  is  denied, 
under  the  absurd  idea  that  its  amount  should 
be  limited  by  the  law-making  power,  derange¬ 
ment  and  disorder  in  business  inevitably  fol¬ 
low.  As  well  might  the  quack  assume  to 
determine  the  quantity  of  blood  necessary  to 
the  health  and  vigor  of  the  human  system. 
Mr.  Fullarton,  in  his  work  on  the  Regulation 
of  Currencies,  uses  the-  following  significant 
language  : 

With  onlyoneor  two  exceptions,  and  those  admit¬ 
ting  of  satisfactory  explanation,  every  remarkable 
fall  (rise)  of  the  exchange,  followed  by  a  drain  of 
gold,  that  has  occurred  daring  the  last  half  century 
has  been  coincident  with  a  comparatively  low  state 
of  the  circulating  medium,  and  vice  versa. 

“On  no  occasion  was  this  proposition  more  strik¬ 
ingly  exemplified  than  during  the  period  immedi¬ 
ately  preceding  the  suspension  of  cash  payments  in 
1797,  when,  lor  two  years  together,  a  system  of  the 
most  determined  contraction  was  carried  on  by  the 
directors  ofthoBankofBngland  with  unrelenting  per¬ 
severance,  reducing  thecirculation  from  £16,017,510  on 
the  28th  February,  1795,  to  £8,640,250  on  the  25th  Feb¬ 
ruary,  1797,  without  arresting,  in  the  least  apparent 
degree,  the  drain  of  gold  which  was  then  in  progress 
for  restoring  the  exchanges.  The  restoration  of  the 
exchanges  to  its  bullion  par  from  a  depression  of  full 
thirty  per  cent,  was  accomplished  in  1816,  after  various 
remarkable  vicissitudes,  in  the  face  of  an  enlarge¬ 
ment  of  the  issues  of  the  Bank  of  England  to  an  ex¬ 
tent  varying  from  three  to  six  millions.” 

I  could  refer  to  fact  upon  fact  in  the  history  of 
the  past  to  illustrate  this  view  ;  but  time  forbids 
at  present.  Now,  if  the  policy  T  have  indicated 
be  adopted,  the  country  can  afford  to  wait  the 
pleasure  of  the  bondholders  on  the  subject  of 
funding  their  securities  into  a  new  loan.  If 
they  wish  to  keep  the  old  bonds  let  them  do  so, 
and  we  will  pay  their  interest  and  trust  the 
future  for  solution  of  our  difficulties.  If  the 
debt  must  be  funded  in  the  present  stringency 
of  the  money  market  it  would  be  far  better  to 
reduce  the  interest  and  pay  the  market  rate  of 
discount  on  the  bond.  In  this  respect  I  differ 
materially  from  the  chairman  of  the  com¬ 
mittee.  Even  the  Senator  from  Vermont 


14 


.admits  that  the  debt  may  be  funded  at  live  per 
cent. 

On  his  theory  of  voluntary  conversion  this 
is  an  admission  that  money  may  be  had  at  five 
per  cent.  But  let  us  suppose  money  to  be 
worth  six  per  cent.,  which  strengthens  the  ar¬ 
gument  against  me  ;  and  yet  I  insist  that,  if 
the  debt  is  to  be  funded  into  a  ten-forty  bond, 
the  Government  may  save  hundreds  of  millions 
by  issuing  securities  at  a  lower  rate  of  interest 
and  placing  the  equivalent  discount  in  the  body 
of  the  bond.  The  gain  to  the  Government,  of 
course,  arises  from  the  difference  of  opinion  as 
to  the  period  when  the  debt  can  be  paid.  Cap¬ 
italists  insist  that  it  can  be  paid  in  from  ten  to 
twenty  years.  I  believe  no  such  thing.  But, 
as  they  have  the  money,  it  is  their  judgment 
and  not  mine  which  will  likely  control  its 
investment. 

Now,  suppose  a  six  per  cent,  ten  year  bond 
is  wortii  par,  then  similar  bonds  at  lower  rate3 
of  interest  are  worth  as  follows  : 

At  five  per  cent . $92  56 

At  four  per  cent . , .  85  12 

At  three  and  a  half  per  cent .  81  40 

At  three  per  cent . . .  77  63 

But  our  six  per  cents  are  really  worth  in 
currency  109.  The  ten  years’  bonds  of  lower 
rates  should  be  worth  as  follows: 

At  five  per  cent . $100  89 

At  four  per  cent .  92  58 

At  three  and  a  half  per  cent .  88  72 

At  three  per  cent .  84  90 

Now,  if  we  should  agree  to  fund  at  the  dis¬ 
count  in  consideration  of  lowering  the  interest, 
we  must  give  for  lour  per  cents  $106  93;  for 
three  and  a  half  per  cents.,  $112  71 ;  for  three 
p>er  cents.,  $117  78. 

Suppose,  then,  we  fund  $2,000,000,000  at 
four  per  cent.,  we  shall  only  increase  the 
-amount  to  $2,138,600,000;  at  three  and  a  half 
per  cent.,  to  $2,254,200,000  ;  at  three  per  cent., 
to  $2,355,600,000. 

1  do  not  imagine  that  the  principal  of  the 
debt  will  be  paid  in  the  next  lifty  years.  But 
suppose  it  shall  be  paid  in  ten  years,  then 
nothing  will  be  gained,  1  admit,  except  the  im¬ 
mediate  benefits  arising  from  the  reduction  of 
the  annual  interest  budget. 

The  annual  interest,  at  five  per  cent.,  is 
$110,000,000;  it  would  be,  at  four  per  cent., 
$85,544,400;  at  three  and  a  half  per  cent., 
.$78,897,000;  and  at  three  per  cent.,  $70, - 
■668.000. 

And  now,  if  I  am  right  in  supposing  that  fifty 
years  will  elapse  before  payment  of  the  princi¬ 
pal,  let  us  see  what  the  nation  will  make  by  the 
-change?.  One  dollar  at  five  per  cent,  compound- 
interest,  paid  semi-annually,  in  fifty  years 
amounts  to  11.8137.  Two  thousand  million 
•dollars,  then,  will  amount  in  the  same  time 
to  $23,627,400,000.  One  dollar  at  four  per 
cent,  compound-in-terest,  paid  semi-annually, 
amounts  to  7.2446.  Hence  the  debt,  if  now 
funded  at  that  rate,  would  amount  in  fifty  years' 
to  $15,493,301,560;  making  a  saving  to  the 
nation  of  $8,134,098,440.  The  saving  to  the 
nation,  if  funded  at  three  and  a  half  per  cent., 
will  be  $10,778,460,000.  If  funded  at  three 
per  cent,  the  saving  will  be  $13,027,200,000. 


But  suppose  you  reject  the  idea  that  the  in¬ 
terest  should  be  compounded.  Let  us,  then, 
take  it  at  simple  interest,  and  see  what  the  Gov¬ 
ernment  will  have  paid  in  actual  cash  on  the 
principal  and  interest  when  fully  discharged  : 

$2,000,000,000  at  five  per  cent,  simple  interest  for  fifty 

years .  $7,000,000,000 

$2,138,600,000  at  lour  per  cent,  simple 

interest  for  fifty  year3 .  6,415,800,000 

Saving . $584,200,000 

$2,254,200,000  at  three  and  a  half  per 
cent,  simplo  interest  for  fifty  years...  6,199,050,000 

Saving .  $800,950,000 

$2,355,600,000  at  three  per  cent,  simple 

interest  for  fifty  years .  5,889,000,000 

Saving . $1,111,000,000 

So  it  becomes  apparent  that  the  debt  should 
be  funded  at  lower  rates  of  interest,  even  if 
we  have  to  increase  the  principal  for  the  priv¬ 
ilege  of  doing  so. 

One  good  that  may  possibly  be  educed  from 
the  existence  of  the  debt — if  there  be  good  in 
such  a  thing — is  that  it  is  now  placed  in  the 
power  of  the  Government  indirectly  to  regu¬ 
late  the  rates  of  interest  between  individuals. 
If  we  cast  this  good  aside,  and  also  the  kindred 
one  of  founding  upon  public  securities  a  safe 
and  uniform  currency,  that  debt  may  stand  for¬ 
ever  an  unmitigated  curse. 

Whatever  else  we  do  we  must  reduce  the 
rate  of  interest  on  the  debt.  If  we  can  do  it 
only  by  consent  of  the  creditors  let  us  get  their 
consent  on  the  best  terms  we  can.  It  is  bet¬ 
ter  to  pay  for  this  as  a  great  national  boon 
than  to  lose  the  present  opportunity  of  secur¬ 
ing  it. 

Mr.  President,  for  what  I  have  said,  I  shall 
be  attacked  as  an  enemy  of  the  bondholders. 
I  shall  be  called  a  repudiator.  I  shall  be  rep¬ 
resented  as  hostile  to  a  specie  standard  of 
value.  Neither  is  true  ;  but  men  are  so  given 
to  extremes  that  opposing  views  are  seldom 
met  with  fairness.  Time,  which  sets  all  things 
even,  must  determine  whether  I  am  right  or 
wrong.  I  conscientiously  believe  that  we  can 
pay  neither  five  nor  six  per  cent,  interest  on 
this  public  debt.  Considering  the  circum¬ 
stances  of  its  creation,  it  is  too  exacting  that 
the  creditors  should  not  only  demand  a  change 
in  the  terms  of  their  contract,  but  a  relentless 
depletion  of  the  circulating  medium.  Will  not 
one  suffice?  If  we  give  them  a  gold  contract, 
why  ask,  in  addition,  that  productive  industry 
shall  sicken  and  die?  This  policy  injures  the 
people,  it  strikes  down  the  power  of  accumu¬ 
lation  from  labor  and  brings  ultimate  loss  to 
the  bondholder  himself.  It  is  the  old  demand, 
that  bricks  be  made  without  straw.  I  have 
said  that  we  cannot  p>ay  five  per  cent.  I  as¬ 
sert,  without  fear  of  successful  contradiction 
that  no  nation  on  earth  can  show  a  ratio  of 
increase  in  national  wealth  equal  to  five  per 
cent.  Take  England,  with  all  her  greatness 
and  boasted  prosperity,  and  you  will  find  that 
her  ratio  of  increase  from  1823  to  1861  is  only 
two  per  cent.  Take  the  United  States  from 
1810  to  1860,  including  twelve  years  of  gold 
inflation  from  the  mines  of  California,  and  the 
ratio  is  four  and  one  eighth  per  cent.  The 
rates  of  increase  iu  several  of  the  older  but 
most  prosperous  States  in  the  Union,  from 


1850  to  I860,  a  period  of  increasing  relative 
values  as  compared  with  gold,  are  as  follows  : 


In  Massachusetts . 31  per  cent. 

In  New  Hampshire . I. . 4f  per  cent. 

In  Rhode  Island . 41  percent. 

In  New  York . 5.43  per  cent. 


This  unjust  accumulating  power  of  money, 
arising  from  high  rates  of  interest  in  this 
country,  should  not  be  encouraged  by  the 
Government.  If  the  net  profits  of  productive 
industry  are  not  equal  to  five  per  cent.,  then, 
too,  the  interest  of  money  should  be  less  than 
five  per  cent.  He  who  invests  his  capital  in 
the  employment  of  labor  and  the  development 
of  wealth  is  entitled  to  a  dividend  equal  to  the 
interest  income  of  the  man  who  lives  in  idle¬ 
ness  and  luxury.  Suppose  that  our  debt  should 
fall  into  the  hands  of  foreign  holders,  and  the 
annual  increase  of  our  wealth  should  be  less 
than  the  annual  interest  to  be  sent  abroad,  it 
is  then  evident  that  ultimate  poverty  is  only  a 
question  of  time. 

If  the  debt  remains  at  home  the  injury,  in  a 
national  point  of  view,  is  not  so  great.  The 
increased  wealth  would  remain  among  us,  but 
it  would  soon  become  concentrated  in  the 
hands  of  a  few,  to  be  followed  by  all  the  evils 
of  an  aristocracy.  In  such  a  state  of  things 
the  poor  man’s  hope  consists  only  in  the  ex¬ 
travagance  and  profligacy  of  the  rich.  A  nation 
that  encourages  such  a  policy  must  sooner  or 
later  suffer  the  dreadful  consequences.  He 
who  will  scrutinize  closely  the  monetary  con¬ 
vulsions  of  Europe  and  America  will  find  that 
they  had  their  origin  in  the  payment  of  interest. 
Take  the  commercial  disaster  of  1825  in  Eng¬ 
land,  which  capitalists  sometimes  tell  us  were 
owing  to  bank  expansions.  It  will  be  found 
that  the  circulation  of  the  bank  actually  de¬ 
creased,  from  1821  to  1825,  nearly  one  mil¬ 
lion  dollars,  while  the  loans  increased  from 
$18,500,000  to  nearly  forty  millions. 

If  ■we  refer  to  the  panic  of  1837  in  England 
we  find  that,  from  1833  to  1837,  when  it  com¬ 
menced,  bank  circulation  decreased  more  than 
one  million  dollars,  while  the  loans  increased 
from  $27,000,000  to  $75,000,000.  Without 
enumerating  the  figures,  it  is  safe  to  say  that 
the  panics  of  1847  and  1857  in  England  pro¬ 
ceeded  from  the  same  causes.  Turn  back  to 
the  panic  of  1837  in  this  country  and  it  will 
be  seen  that  the  loans  and  discounts  in  the 
banks  rail  up  from  $200,000,000,  in  1880,  to 
$525,000,000  in  1837,  while  the  circulation 
increased  in  the  same  period  from  $61,000,000 
to  $140,000,000. 

The  circulation  of  the  banks  of  the  United 
States  in  1854  was  $204,000,000,  the  loans 
$557,000,000.  In  1857,  when  suspension  and 
bankruptcy  came,  the  circulation  was  only 
$214,000,000,  while  the  loans  had  gradually 
risen  to  $684,000,000.  The  increase  of  bank 
circulation  was  only  $10,000,000,  while  the 
increase  of  loans  was  $127,000,000.  If  we 
turn  to  the  condition  of  the  banks  of  the  State 
of  New'  York,  the  commercial  center,  at  the 
same  period,  wre  find  the  circulation  was  about 
the  same  as  it  was  in  1852,  while  the  loans  and 


discounts  had  increased  from  $127,000,000  to 
$170,000,000. 

Give  me  a  period  when  industry  is  stimu¬ 
lated,  but  has  to  borrow  money  for  the  devel¬ 
opment  of  productive  wealth,  and  I  will  dem¬ 
onstrate  that  it  has  been  soon  followed  by  a 
monetary  convulsion.  Indeed,  this  fact  is 
of  such  universal  acceptance  that  business  men 
in  the  brightest  periods  of  prosperity  have 
learned  to  anticipate  the  coining  of  adversity. 
Another  accepted  truth  is,  that  when  disaster 
comes  it  ruins  the  most  enterprising  business 
men  of  the  community.  This  should  not  be 
so.  Now  is  the  time  to  strike  one  blow  at  the 
evil,  and  I,  for  one,  am  prepared  to  do  it. 

I  am  no  repudiator.  My  understanding  of 
the  contract  made  with  our  creditors  is,  that 
if  the  debts  become  redeemable  during  a  period 
of  suspension,  they  are  payable  in  the  lawful 
money  of  the  Government.  If,  however,  they 
become  redeemable  after  specie  payments  are 
resumed,  or  if  we  choose  to  postpone  payment 
until  that  period,  they  are  then  payable  in  gold. 
These  considerations  are  a  part  of  the  con¬ 
tract.  Debtor  and  creditor  must  have  so  under¬ 
stood  it. 

An  important  question,  then,  left  is  as  to  the 
propriety  of  resumption.  As  nobody  has  pro¬ 
posed  it  in  this  debate,  and  as  nobody  is  likely 
to  propose  it,  I  forbear  at  present  to  show  its 
utter  impossibility.  Such  an  attempt  would 
bring  legislators  into  disgrace  and  the  Govern¬ 
ment  into  bankruptcy.  At  this  po’nt  I  might 
stop.  My  motion  at  present  is  simply  to  reduce 
the  interest.  I  have  offered  no  general  substi¬ 
tute  to  the  bill.  Some  of  its  provisions  I  can 
support ;  others  can  never  receive  my  assent. 
I  cannot  change  the  terras  of  the  contract  with¬ 
out  some  fair  equivalent.  I  will  not  ask  all 
that  justice  demands.  I  would  not  even  con¬ 
sent  to  fund  the  bonds  at  five  per  cent,  interest 
in  gold,  principal  payable  as  it  now  is  in  lawful 
money. 

I  entertain  the  hope  that  specie  payments,  in 
the  course  of  five  or  ten  years,  may  be  resumed. 
If  so,  none  will  be  more  gratified  than  myself 
to  see  the  public  creditors  paid  in  gold.  In 
the  meantime,  however,  a  great  work  is  to  be 
accomplished.  We  must  keep  an  eye  to  the 
industries  of  the  country.  While  too  great 
expansion  of  the  currency  may  be  an  evil,  too 
great  contraction  is  a  much  greater  evil.  T  he 
end  desired  by  my  friend  from  Vermont  [Mr. 
Morrill]  is  the  one  desired  by  me ;  but  I 
w'ould  reach  it  by  a  process  different  from  bis. 
His  plan  has  been  partially  tried  and  ended  in 
utter  failure. 

It  is  true  that  I  presented  a  measure  to  the 
Senate  on  the  21st  of  January  last  which  did  not 
fully  embody  my  convictions  upon  this  import¬ 
ant  subject.  1 1  was  a  compromise  with  opposing 
opinions.  I  had  to  conciliate  the  enemy.  My 
first  proposition  was  to  extend  the  legal-tender 
circulation  to  $400,000,000 — what  it  was  when 
this  system  of  contraction  was  commenced. 
This  I  would  do  as  a  condition-precedent  to  any 
attempt  to  re-fund  the  public  debt.  So  far  as 
!  I  am  individually  concerned  I  wish  not  to  be 


16 


bound  by  any  such  limitation  ;  but  so  great 
seems  to  be  the  fear  of  Government  issues,  that 
the  limitation  was  inserted  rather  to  save  the 
measure  from  that  condemnation  which,  in  my 
judgment,  proceeds  from  an  unfounded  preju¬ 
dice. 

The  next  proposition  was  to  fund  the  entire 
public  debt  into  ten  fifty  bonds,  bearing  an  in¬ 
terest  not  exceeding  three  and  a  half  per  cent. , 
principal  and  interest  to  be  paid  in  coin,  and 
to  be  exempt  from  all  local  taxation.  It  was 
then  proposed  to  repeal  the  limitation  upon 
the  amount  of  circulating  notes  to  be  issued 
by  national  banks,  and  to  leave  banking  free 
under  proper  guards  and  restrictions — one  of 
which  should  be  a  rigid  redemption  of  their 
issues  at  some  commercial  center.  The  new 
bonds  were  to  be  substituted  by  national  banks 
for  the  old,  and  a  part  of  the  accruing  interest 
on  the  bonds  deposited  was  to  be  retained  in 
the  Treasury  as  a  sinking  fund  for  their  ulti¬ 
mate  redemption.  In  consideration  of  the  re¬ 
duction  of  interest,  and  the  retention  of  a  part 
of  that  which  would  annually  accrue,  such  i 
amount  of  taxation  was  to  be  remitted  upon 
the  capital  and  circulating  notes  of  the  bank, 
as  to  enable  them  to  make  reasonable  divi¬ 
dends.  The  harvest  season  for  banks  is  during 
periods  of  suspension,  and  we  all  know  that 
their  profits  during  the  last  few  years  have  been 
enormous. 

It  was  also  proposed  that  after  a  given  pe¬ 
riod  one  eighth  part,  and  after  a  certain  other 
period,  one  fourth  part  of  the  tariff  duties 
might  be  paid  in  legal-tender  notes.  But  the 
last  proposition  on  the  subject  of  the  cur¬ 
rency  is  the  one  so  fiercely  assailed  by  the  Sen¬ 
ator  from  Vermont  on  yesterday.  Tie  must 
not  suppose  that  I  failed  to  enjoy  his  com¬ 
ments  upon  it.  It  was  another  one  of  those 
concessions  I  was  forced  to  make  to  an  unrea¬ 
soning  prejudice  excited  by  such  able  denun¬ 
ciations  as  his  own.  Had  I  consulted  my  own 
convictions  of  right,  and  not  been  forced  to  j 
beg  my  way  through  assailing  errors,  I  should 
have  framed  it  in  a  manner  much  less  accepta¬ 
ble  to  his  taste. 

I  am  satisfied  that  $700,000,000  will  not  fur¬ 
nish  a  sufficient  circulating  medium  for  the 
people.  It  is  only  $17  50  per  capita.  It  is 
eight  or  nine  dollars  less  than  England  has 
with  its  compact  population  and  bank-check 
facilities;  it  is  less  than  France  has,  whose 
thirty- eight  millions  of  people  are  grouped 
upon  an  area  of  territory  not  as  large  as  the 
single  State  of  Texas. 

The  first  requisite,  in  my  judgment,  was  to 
repair,  as  far  as  I  could,  the  error  of  contrac¬ 
tion.  I  would,  if  I  could,  expand  beyond 
$400,000,000  of  legal-tender  notes,  but  the 
expansion  should  not  be  permanent.  All  legis¬ 
lation  should  look  to  ultimate  resumption  :  but 
reasonable  expansion  will  facilitate  that  end  li 
better  than  unreasonable  contraction.  It  is 


almost  certain  that  resumption  can  better  be 
secured  through  the  medium  of  the  banks  than 
through  the  efforts  of  the  Government,  which 
cannot  accumulate  gold  for  purposes  of  re¬ 
sumption  withoutdefeatingthe  very  end  desired. 
Resumption  is  worthless  without  restoration  of 
business.  With  that  restoration,  and  an  earnest 
application  of  industrial  energy  to  the  produc¬ 
tion  of  wealth,  resumption  of  specie  payments 
is  inevitable.  It  was  thought  that  the  estab¬ 
lishment  of  new  banks  would  indicate  the 
revival  of  industry,  and  that  that  revival  would 
indicate  an  advance  towards  specie  pay¬ 
ments. 

When  that  advance  was  made  I  thought  it 
would  be  safe  to  cancel  a  part  of  the  legal 
tenders.  Compromising  upon  $700,000,000 
of  legal  tenders  and  circulating  bank  notes, 
as  the  amount  beyond  which  Congress  would 
not  permit  me  to  go,  I  endeavored  to  secure 
two  objects  in  the  proviso  so  cruelly  criticised 
by  my  friend.  The  one  was  to  retire  the 
legal  tenders,  as  circulating  notes  supplied 
their  place,  until  the  legal  tenders  should  be 
reduced  to  $250,000,000.  My  second  object 
was  gradually  to  build  up  a  safe  and  solvent 
banking  system,  the  capital  of  which,  at  the 
proper  time,  would  lend  its  aid  to  effect  the 
resumption  of  specie  payments.  I  did  not 
intend  to  indicate  that  I  would  not  be  willing 
to  withdraw  the  remaining  $250,000,000  at  the 
proper  time,  but  1  did  intend  to  indicate  that 
another  Congress  could  act  on  that  subject 
with  a  better  knowledge  of  its  effects  than  we 
possibly  can. 

Before  I  pass  from  this  subject  I  desire  to 
say  that  whatever  plan  may  be  adopted  for  un¬ 
raveling  the  tangled  skein  of  our  finances, 
something  should  be  done  to  prevent,  if  possi¬ 
ble,  those  frequent  monetary  revulsions  which 
belong  to  specie-paying  periods.  The  day 
when  paper  money  shall  cease  to  be  used  in  the 
United  States  none  of  us  will  ever  see.  When¬ 
ever  paper  money  is  based  upon  and  redeem¬ 
able  in  coin,  panics  will  occur.  When  runs 
are  made  upon  the  banks  they  contract  their 
circulation  and  discounts,  thereby  increasing 
the  very  evils  which  they  should  be  able  to  check 
and  prevent.  If,  in  these  seasons  of  sudden 
contraction  the  banks  could  be  temporarily 
permitted  to  redeem  in  Government  notes,  they 
could  furnish  relief  to  the  community  instead 
of  forcing  them  to  bankruptcy.  These  notes 
should  be  furnished  by  the  Treasury  Depart¬ 
ment  on  deposit  of  Government  securities  to 
be  withdrawn  when  the  exigency  has  passed. 

In  alluding  to  the  suggestions  contained  in 
my  proposition  I  must  not  be  understood  as 
urging  them  upon  the  Senate.  My  future  course 
will  be  determined  by  the  fate  of  the  motion 
which  I  have  submitted.  If  it  is  adopted  I 
shall  see  some  hope  in  the  future.  If  it  is  de¬ 
feated  I  trust  that  no  funding  bill  will  be  passed 
during  this  session. 


